Portfolio Return Metrics Explained: XIRR, ROI & Average Rate
We present different portfolio return indicators that help evaluate your investments.
Each indicator reflects different aspects of returns – from expected returns to actual earned income, taking into account the timing of cash flows, delays, and incurred expenses. By understanding what the average interest rate, XIRR, and ROI mean and how they are calculated, you can assess your portfolio results more objectively and make informed decisions.
Average interest rate – the expected return on investments if all obligations are met as scheduled.
XIRR – the expected real return of the active investment portfolio, taking into account actual and planned cash flows as well as potential delays.
ROI – the historical average annual weighted portfolio return, calculated from July 2023. The metric is calculated by taking monthly income minus monthly expenses and dividing it by the active portfolio value at the beginning of the month.
Below are answers to the most frequently asked questions:
Are early repayments included in XIRR, and if so, how are they calculated?
Yes, early repayments are included in the same way as all other cash flows – the full early repayment amount is included on the date it is received.
What is the difference between XIRR and ROI?
XIRR takes into account both the amount of income received and the exact dates on which it is received. ROI does not assess individual inflows or their dates and does not include potential losses from delayed loans. ROI reflects the actual profit of the active portfolio – total monthly inflows relative to the active portfolio value at the beginning of the month.
How are losses from delayed loans assessed when calculating XIRR?
Detailed calculations can be found here >>>.
Does XIRR show an average annual return?
Both XIRR and ROI show an average annual return.
How often is XIRR recalculated?
ROI is recalculated at the beginning of each month, while XIRR is recalculated daily.
Why is ROI calculated from July 2023?
ROI is calculated from July 2023 because this is when we began systematically and fully collecting all the data required for accurate historical return assessment.
Why can’t I see ROI in my self-service account?
The ROI metric starts being calculated from the fourth month of investing, i.e. after three full months have passed since the first investment. Only then is there a sufficient period for an objective evaluation of results.
What expenses are included in ROI calculations?
Monthly expenses include all investment-related monthly costs, including secondary market fees and the Investor Service Fee applied after the end of the free six-month period.
How is the average interest rate calculated?
The calculation takes into account how much capital is invested in each loan, therefore using a weighted average rather than an arithmetic average. Each investment’s interest rate is multiplied by its outstanding balance, and the resulting sum is divided by the total portfolio value.