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Post by Financial Thing on Jul 20, 2015 15:28:58 GMT
I pulled up the returns calculator on the DistGen Hinton offering which shows the return as 8.75% over 19 years. Using their calculator and an initial investment of £5k, estimated returned is £11,058 after 19 years. Using compounded interest, this equates to be approx. 4.3% annually. 8.75% would be well over £24k over 19 years.
So what am I missing here?
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Post by Financial Thing on Jul 20, 2015 16:28:44 GMT
Im no math wizard but at 8.75% simple interest should be £8313 + £5000 which = £13,303. I'm presuming the additional is taken for AG's fees?
But I still don't understand how this investment is better than shoving the money into a 4% long term compounding interest bond?
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Post by brokenbiscuits on Jul 20, 2015 17:15:03 GMT
There is a bit of "wizardry" in how the return is shown on the summary. Much more obvious in the offer document.
worth reading the docs if you have not already.
every 6 months you will get 1/38th of your capital. In year 1 you will get a high 3% just under 4% return.
now the following year slightly more again. The final years show crazy high returns because the rate keeps rising but your capital is back with you (reinvested most likely to get the compound returns you were looking for). Its a slow burner, the "good" returns come about year 7 onwards. You hope the project hasn't folded by then or anytime with a 19 year commitment.
read the offer document for all the details.
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Post by abundance on Jul 22, 2015 14:23:41 GMT
Hi optionstrader, I'm Tom, I work at Abundance. For all the projects on Abundance, the return is quoted as an Internal Rate of Return (IRR). As brokenbiscuits mentioned, an IRR is not the same as a yearly interest rate. An IRR is a way of showing the overall return from a particular investment, and is useful in this case because it takes into account that you are getting some of your capital back over the life of the investment (all the Debenture investments on Abundance pay back an equal proportion of your investment every 6 months). Because you are getting some of your capital back and this doesn't affect how much income you're getting back, your estimated yearly interest rate is therefore expected to change (increase) each year, so we can't easily show your return as a yearly rate. You should take a look at the Offer Document for the DistGen Hinton for more details, but the Calculator page on Abundance will also be helpful. The Calculator for each project shows what you are expected to get back in capital and income each year, and also gives you the option to show this as a yearly percentage (click the toggle at the bottom of the calculator). You might find this option useful for seeing how it varies over the life of the Debenture. Here is the link to the DistGen Hinton project calculator - www.abundancegeneration.com/projects/#!/4169782/calculator The returns quoted for any of the projects on Abundance are after fees, so it shows what you are expected to get back in your pocket after the project has paid our fees. The return figure is for the investment in that project only - it does not take into account any compounding, for example if you were to take your capital repayments and investment income and reinvest in another project of elsewhere. Hopefully that helps, let me know if you have any other questions or if that's still unclear! Tom |
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