Any investment platform eventually has to address one uncomfortable topic: a real return on investment (ROI). Comparing ROI across different platforms is rarely simple. There are several reasons for this.
Different platforms use different methods to calculate returns. These methods are usually documented and publicly available, but users still often complain that the results shown by platforms are too optimistic, for example:
- Not adjusted for defaults or overdue loans.
A platform may say “only one payment is late”, meaning they do not treat the entire loan as potentially defaulting — even though for the investor, the full principal is at risk. - Missing negative data or hiding losses.
Some platforms ignore fees or other costs (transfer fees, service fees, currency losses). These still affect your true return, even if the platform excludes them from its calculations. - Calculated in a way that flatters the platform rather than reflects reality.
Platforms rarely start their presentations with pessimistic scenarios.
Because of this, it’s up to us — the investors — to calculate realistic and comparable returns ourselves.
Continue reading Tracking Investment Returns: A Practical Guide Using XIRR
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