Endowus values transparency and wants you to clearly understand your returns net of all fees. A better understanding of performance is a better understanding of your investment portfolio and how it is tracking towards your goals. This leads to smarter investing and better outcomes.

Please note that we do not include your cash balance(s) in our calculations.

**Gain or Loss**

The dollar gain or loss is a simple measure of how your investments have performed. The figure includes both realised and unrealised market earnings/losses.

*Gain or Loss = (Market earnings/losses + Distributions paid out + Cashback) - Endowus Fee*

**Modified Dietz Rate of Return (Total return)**

In the Modified Dietz Rate of Return calculation, money is appropriately weighted based on when an investment or redemption was made during the investment period. The calculation takes into account the impact of your deposit and withdrawals.

*Modified Dietz Rate of Return = Gain or Loss / weighted average net investment amount*

Example: On Day 1, you make an investment of $10 and the investment grows to $12 on Day 99, which is a 20% increase. Then on Day 100, you make a new investment of $1,000 and your ending balance is $1,012.

If you do not calculate the Modified Dietz Rate of Return of your investment on Day 100, then your calculation will be as follows: $2 (gains) divided by $1,010 (net investment amount. The 0.2% return would not be a fair representation of your return.

With the Modified Dietz Rate of Return, your return is adjusted based on your average net investment amount. In the above example, the calculation of the Modified Dietz Rate of Return is as follows:*$2 gain /**[**($10*99 days+$1,010*1 day)/100 days**]** = 10% Modified Dietz Rate of Return*

**Time-weighted Return**

The time-weighted return measures returns after taking away the effects of size and timing of your investments and redemptions. This is the best metric for comparison to other investments or benchmarks.

**Example 1**: You have a monthly-recurring investment of $1,000 for 12 months in a 60% equities | 40% fixed income portfolio. If the portfolio’s returns are 6% in the last 12 months, then your time-weighted return is 6% (minus fees, plus Cashback) as it ignores the effects of your monthly-recurring cash flow.

In contrast, if we include the effect of your monthly recurring cash flow and assume a consistent monthly return of 0.5%, then the total return is 3.22% and it would not be representative of how the portfolio performed in comparison to other investment options.

**Example 2**: You invest $100, and the portfolio goes down 7% in the first month. You then invest $1,000 and the portfolio goes up by 5% over the following month. If you take away the size and timing of your cash flow, the time-weighted return is calculated as follows: (1-7%)*(1+5%) = -2.35%. In contrast, the total return is +4.33% because of the relatively larger amount of money invested before the portfolio increased in value.

*Note: It is possible for your time-weighted return to be negative even though you have a positive total return and annualised internal rate of return. This can be the case due to the size and timing of your investments.*

**Annualised internal rate of return (IRR)**

The annualised IRR takes into account the size and timing of your investments and redemptions, as well as asset growth. It is a helpful metric for telling you how hard your money is working in totality. The metric includes outflows (e.g. investments, fees) and inflows (e.g. redemption proceeds, dividends, Cash back) as well as the size and timing of each transaction.

**Example 1:**

$100 investment on Day 1

$100 investment on Day 5

$100,000 investment on Day 100

$10,000 redemption on Day 200

$110,000 value on Day 365 (1 year)

= 30.03% annualised internal rate of return

If we flip the timing of cash flows, the return could change quite drastically.

**Example 2:**

$100,000 investment on Day 1

$100 investment on Day 5

$100 investment on Day 100

$10,000 redemption on Day 200

$110,000 value on Day 365 (1 year)

= 20.65% annualised internal rate of return

Despite the same net investment and ending value, the return is higher in Example 1 as compared to Example 2 due to the weighted amount of money contributing towards the investment throughout the year.

If we stretch the end value date by another year, the annualised internal rate of return changes drastically:

**Example 3:**

$100,000 investment on Day 1

$100 investment on Day 5

$100 investment on Day 100

$10,000 redemption on Day 200

$110,000 value on Day 1096 (3 years)

= 6.70% annualised internal rate of return

The cash flow and ending value are exactly the same in Examples 1 and 2. Nonetheless, the returns are different due to a change in the time taken to reach the ending value.

*Note: annualised returns for periods of less than one year will not be shown as they may show some misleading numbers for a short time period. *