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Portfolio What-if Analysis Read More
  • 1. Create Portfolio
  • 2. Add Loans
  • 3. Review Simulation Results

Portfolio-simulator and What-if Analysis (PWA) is an educational tool that helps in building the understanding of how a multi-loan portfolio operates. Faircent is a Peer-to-Peer (p2p) platform. Borrowers and Lenders transact loans on this platform. A lender would like to know how the returns on a portfolio of such loans can be measured and how the p2p philosophy works, in general. Using the tool, a user can create multiple portfolios of varying duration, amount, interest rates and tenure. The impact of these parameters can be studied by analysing key metrics and portfolio returns.

Tutorial

Step 1: Create PortfolioWhat's this

A portfolio consists of multiple assets, in this case, loans to borrowers. You would need to create a portfolio first. The portfolio name can be anything of your choice, and multiple portfolios can be created. Specify the amount you would like to invest via that portfolio. For simulation purposes, an amount of Rs. 1 to 10 lacs would suffice.


Step 2: Add Loan(s) to PortfolioWhat's this

Once a portfolio has been created, loans can be added to it. Since, there can be multiple portfolios, select the portfolio you want to use for simulation.

Select Loan purpose, Amount to lend, Rate of Interest (ROI) of the loan, Tenure of the loan in months and loan start date. Click Add Loan to add loan to the portfolio. The amount invested in the loan is deducted from the Available Balance. You can create multiple till the Available Balance is exhausted.

Loans can be edited and deleted. If you want to delete the portfolio (and all loans along with it), you can click on the Delete link below the My Portfolio dropdown list.

Over its lifetime, a loan can default, meaning an EMI is not paid. The Portfolio Simulator assumes that once a single EMI defaults, all the EMIs that follow will also default. In other words, the remainder of loan payments will default in entirety once any payment defaults. Click on the Default button against a loan. Select the EMI that defaults first. All EMIs following the checked EMI will be set to default. Click Apply to save the simulation. Repeat this for other loans, if desired. A loan that defaults is marked in red.

You can clear all the defaults by Clicking on Clear All Default link.

  • My Portfolio
    • Total Balance

      0
    • Available Balance

      0
  • Amount ()
  • ROI (%)
  • Tenure (months)
  • Format: dd/mm/yyyy
Borrower Name  Loan Purpose  Loan Amount() ROI(%)  Tenure (months) Start Date  EMIs (

Step 3: Review Simulation Results What's this Understand your returns calculations

The Portfolio Simulator will perform calculations and present the metrics. Faircent has standardized portfolio returns using the concept of NAR – Net Annualized Return. A graph displays variation of NAR or portfolio return over the life of the portfolio. Other measures such as Principal recovered, Income or interest earned, Principal and potential income lost are also displayed graphically. You can also change the As of Date and the metrics displayed will change.

One can build multiple scenarios and conduct What-if analysis. This will help the individual in building a deep of understanding how the Peer-to-Peer platform works. Investing at different times, re-investing the returns, investing at different rates and tenure have an impact on Portfolio returns. It may be beneficial to invest in more number of loans with smaller amounts than investing in fewer but higher amount loans.


  • Portfolio Summary and Return as of :
Number of Loan(s): 0
Total Amount Invested: 0
Total Principal Received: 0
Total Income: 0
Total Principal Lost: 0
Potential Income Lost: 0
Net Annualized Return (NAR):0 %
Principal 30 to 89 days past due: 0
Principal 90 to 180 days past due: 0
Principal 180+ days past due: 0