Hi @Rainbow112,
My name is Amanda and I am the Head of Client Engagement at StashAway. Just thought I'd jump in to help clarify our returns calculation for you
The reflected returns are not the year-to-date profit loss as per the market value of the asset. The inflated profit/loss values are mainly due to the fact that we currently use the Modified Dietz Method (Click here for more information) to calculate P&L for your portfolio returns.
The Modified Dietz Method evaluates a portfolio's return based on a weighted calculation of a portfolio's cash flows, it takes into account the timing of cash flows and assumes that there is a constant rate of return over a specified period of time. Furthermore, the cash flows used in the formula are weighted based on the time they occurred in the period. For example, if they occurred in the beginning of the month they would have a higher weight than if they occurred at the end of the month.
This method weighs your portfolio on the following:
(the total number of calendar days in the investment period x the number of days from the start of the investment period until a specific cash flow occurs) / the total number of calendar days in the investment period.
The formula itself for Modified Dietz looks at the value of your portfolio at the beginning and the end of the period. This is how we calculate your returns.
This calculation method suffers most when there are one or more large cash flow occurs and/or cash flow occurs during periods of high market volatility.
For example, with reference to the -41.56% reflected loss in Consumer Discretionary Select Sector SPDR Fund, the ETF has seen a sharp drop in price from 1st March to the current date. Due to the nature of the Modified Dietz method, the return values seemed more negative (-41%) than when compared to the market values (around -2%).
To illustrate this further, we can look at the price of iShare 10-20 Year Treasury Bond ETF as well.Based on the market price, there was a gain of roughly 1.67% since the beginning of March to date, however a 20.83% profit was reflected in the screenshot.
With return calculations, there are benefits and limitations of different methods. As our portfolios are designed for a long-term investment horizon, we felt that the Modified Dietz is a better reflection of returns. We wanted to capture both the timing, the volume of your deposits, the frequency etc, over a longer period of time which we prioritized over a metric that focuses on reflecting returns over the short term, where there is more volatility and noise in the market.
However, we have received similar feedback to the way our performance is displayed, and we are currently working on an overhaul to improve this so that the figures become clearer and easier to understand.
In the meantime, if you have any further questions, please feel free to email us, call us at +65 6248 0889 (9am - 6pm, Monday - Friday, excluding SG public holidays) or Whatsapp us at +65 9467 2416.
