How Do You Measure Your Return From Zopa?

I agree xirr is the best, but, and its quite a big but. There are bugs in Excel that sometimes throw the irr functions out quite a bit, in my experience so far using it though it is very noticeable, the same error is in online versions as well not just with excel. That said i have my spreadsheets using a rolling xirr function that works quite well for me. Every now and again it throws a rate of 12.5% or more instead of the more normal 3-5% but mostly it shows we are not doing as well as Zopa might suggest for example

Mrs aju's ISA is showing 3.98% xirr but zopa says higher. We are lending at a plus/rest ratio of 20/80 and she does have quite a high sg cover too.

The bugs are quite well documented online and so far have never been fixed!. That said it works well for me. I do also use monthly interest extrapolation to corroborate my figures but recently with reinvesting invest returns into ISA it makes the monthlies a bit harder. Xirr works better in that scenario. I usually use the tax year figures but like you this year has been a bit of a awkward one with all the re-investment etc. 

xirr and irr are similar except that xirr works for all dates whereas irr uses fixed months - I think that's right I haven't used it for a long time.

If it were the case you could make an assumption of all dates starting on the 1st of the month say but you would have to read up on it to be certain. This will of course skew things slightly especially if it was relend from invest to ISA but to be honest it probably wouldn't matter too much. I'd still be using the monthly interest and multiplying out by 12 and then averaging as a guide check though.

The following may be completely wrong or completely obvious. But consider a zopa account opened with a given balance on a given date and holding a new given balance on some subsequent date with various deposits and/or withdrawals made during the intervening period.  Must there not be some, unique, fixed interest rate which if applied to the account throughout the relevant period would result in the same final balance? Is that a useful number? Is it possible to calculate it? Is it similar to XIRR/IRR?

On a broader note it seems indefensible that zopa while happy to provide headline and target interest rates can provide no measure of 'effective' interest rate to date on a particular account. I appreciate that that rate may evolve with time, and zopa may be wary of alarming customers with natural dips correlated with the timings of defaults. But hiding the rate is bordering on sharp practice: 'give us your money and we'll never tell you what interest rate you got'.        

jaan,  spareapennyor2,

Thank you.

I do similar to this too, i use it with xirr as well as i'ts less susceptible to errors that sometime plague xirr i find. i  also do a rolling annual as well and at end of tax year i use tax year statement but this year it will somewhat skewed with my isa transfers and invest to isa movements so xirr will be needed.

I've personally never caught XIRR in an error, although GIGO is definitely true. I suspect it iterates to a solution, which is what I used to do the hard way ..i.e. guess a return, calculate what the balance should be if that was the return, adjust the guess based on the error between what the balance should be and what it actually is, lubricate and repeat until the error is small enough to ignore (my idea of small enough, not AC's femtopence). I imagine XIRR does the same, only with the workings hidden (and rather faster).