Is stashaway going to add bitcoin to our portfolio?



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a few forumers here have explained ROI/MWR/TWR but I'm going to try and chip in:

Return of Investment (ROI): This is the simplest way to calculate your returns which is 992 / 5700 = 17.4%. Laymen much prefer to refer to this number but it does not do very well to tell a 'story'. That's why the more experienced prefer the MWR figures.

Money Weighted Return (MWR): This is ROI with a 'story'. The MWR calculation takes into account the timing & amount of the DCA you have added over the period. Achieving a high MWR means you have increased contribution during market down days (buy cheap MORE) and reduced contribution during market up days (buy expensive LESS). And vice versa. There is actually a lot more to my short explanation but I fear explaining the formula in detail may add to the confusion so I'll just leave it at that. Basically MWR takes into account market timing. If you see your MWR > TWR, it clearly means you have successfully timed the market. Which brings us to TWR.

Time Weighted Return (TWR): This is your returns if THEORETICALLY you invested just once (lump sum) and never DCA ever. For example if you invested RM100 on 1st Jan 2019 and never DCA-ed. Your net asset value would be RM100 + 46.39% = RM 146.39 today. Seems meaningless right? But TWR is very useful if you want to compare your investment to another investment. So say you compare your last one year StashAway TWR of 46.39% versus a fund on FSM like the Franklin US Opportunities Fund last one year TWR of 38.06%. You can immediately conclude that StashAway outperformed the Franklin fund. The MWR and ROI is unable to make such comparisons as the figures has been 'polluted' by our DCA.
hope this helps! and it if made things even worse, i apologise

P/S: i noticed you mentioned that you calculated a 15% ROI. i think you calculated as follows: 992 / 6692 = 14.8%. Just wanted to point this difference in calculation in case you were confused why your 15% figure is not up there in the explanation.

If TWR more than MWR, how? That means I suck?

Time Weighted Return (TWR): This is your returns if THEORETICALLY you invested just once (lump sum) and never DCA ever.

If TWR more than MWR, how? That means I suck?

If TWR more than MWR, how? That means I suck?

Time Weighted Return (TWR): This is your returns if THEORETICALLY you invested just once (lump sum) and never DCA ever.

This is incorrect. The Time Weighted Return is the compounded ROI of each subperiod after accounting for deposits and withdrawals within that subperiod. Money Weighted Return calculation does not take into account the month-to-month performance and focuses entirely on deposits, dates, and final values. MWR returns large numbers when the period is short. Here's a comparison of ROI, TWR, MWR:

Means that you are good disciplined but lazy to time the markets

TWR is good for passive investors who doesn’t want to put into work and just let their savings grow which I believe 90% of SA customer does

MWR is good for those who are willing to put in some effort into understanding and timing the market when to buy hence rotational gain because FX conversion deposits and buy order

There is no right or wrong or suck it is just that approaches are different

For me I prefer MWR because the liquidity of it and the timing of FX which I always look into weekly basis and current ETF prices before putting buy order

The only good thing with StashAway is the buy order will be calculate by them and the awesome spot rates at the moment 

Means that you are good disciplined but lazy to time the markets

TWR is good for passive investors who doesn’t want to put into work and just let their savings grow which I believe 90% of SA customer does

MWR is good for those who are willing to put in some effort into understanding and timing the market when to buy hence rotational gain because FX conversion deposits and buy order

There is no right or wrong or suck it is just that approaches are different

For me I prefer MWR because the liquidity of it and the timing of FX which I always look into weekly basis and current ETF prices before putting buy order

The only good thing with StashAway is the buy order will be calculate by them and the awesome spot rates at the moment 

I could've sworn i got this right. refer this website. According to it, the TWR "is the return generated when you invest $1 at the beginning of the period while no money is added or taken out since then."

Your calculator is kinda echoing the same as well. Let's take the 2.13% subperiod TWR return figure on 30th Jun. You got that by taking the current month end net value (5200.89) minus the previous month end value (3134.15) minus the fresh deposit (2000). Then dividing it all by the previous month end value:

(5200.89 - 3134.15 - 2000) / 3134.15 = 2.13%

So what the table is essentially doing is removing the effects of the RM2000 deposit i.e. it is assuming no money is added or taken out after the first deposit.

I disagree. MWR lower than TWR actually means you time the market wrong. Hence putting lumpsum at the beginning and leave it (TWR) is higher than adjusted returns due to cash flows (MWR).

If you DCA consistently and never try to time the market, your MWR will always be higher than TWR due to the auto rebalancing.

May I ask, if now the right time then to put lump sum into SA since USD exchange rate is low now?

I disagree. MWR lower than TWR actually means you time the market wrong. Hence putting lumpsum at the beginning and leave it (TWR) is higher than adjusted returns due to cash flows (MWR).

If you DCA consistently and never try to time the market, your MWR will always be higher than TWR due to the auto rebalancing.

May I ask, if now the right time then to put lump sum into SA since USD exchange rate is low now?

there have been great discussion over Monthly DCA vs Weekly DCA.

(If you agree with me, please save and share this post to anyone asking whether they should monthly DCA or weekly DCA.)

I have decided to create a simulation using Excel with the following configuration:
- Annual investment: $12000
- Investment Period: 10 years (01 Jan 2021 to 31 Dec 2030)
- The daily unit price changes: Random between 5% to -4.7%

Based on the above,
Monthly DCA amount: $12000 / 12mth = $1000
4x DCA per mth amount: $12000 / 12mth / 4 deposits = $250
Weekly DCA amount: $12000 / (365.25 days / 7 days) = $230.136986
Annually DCA amount: $12000
==
For monthly Investment, I plotted a table, to compare the returns if I invest in every 1st of the month, 2nd of the month, 3rd of the month, ... , all the way to 28 of the month.
- 1st of every month
- 2nd of every month
- 3rd of every month
- ..
- 28th of every month

(I didn't go up to 29, 30 and 31 of every month, because not every month also have the date. And I think 28 days is more than enough for this experiment)

Then review the investment return by calculating the unit obtains x the unit price as of 31 Dec 2030.

So, I have 28 results for me to compare what is the different if I invest in any day of the month

==
For 4x DCA per mth, I chosen the following combination dates:
- 1, 8, 15, 22
- 2, 9, 16, 23
- 3, 10, 17, 24
- 4, 11, 18, 25
- 5, 12, 19, 26
- 6, 13, 20, 27
- 7, 14, 21, 28

So, I have 7 set of results to compare.

==
For weekly is easy, I simulate if I deposit on every:
- Sunday
- Monday
- Tuesday
- ...
- Saturday

I also have 7 set of results to compare

==
For Annually, I didn't want to create 365 sets of result, so I only invested on every 1st of each month
- 1st Jan
- 1st Feb
- 1st Mar
- ...
- 1st Dec

So, I have 12 returns to compare

==
BONUS!!

I also simulated daily DCA! Yes, daily!
Daily DCA amount: $12000 / 365.25 days = $32.85421

========================

P/S and conclusions:
- of course, this is just a simple simulation, it does not take in all variables in the real life stock market
- The results are also predictable and expected:
-- Since I have fixed observation date (31 Dec 2030), the earlier I invest will get more time for the power of compounding
-- weekly DCA does not guarantee better returns. It is only means your DCA is more average than monthly DCA.
-- the daily DCA returns is lower than average of other DCA frequency due to the same reason, many of the deposits doesn't have enough time for the power of compounding
-- conclusion, it doesn't really matter if we are DCA daily, weekly or monthly.
-- The more frequent you deposit, doesn't guarantee the better returns; it is means your dollar cost averaging is more averaging than others.
-- for investment in stashaway, time in market is better than time the market. So, just monthly/weekly/daily DCA as you wish.

No one can answer this for you; you just have to decide what you believe the trend will be in the coming days. If USD weakens 5% relative to MYR and the ETFs increases 5% due to positive investor sentiment, the effects cancel out. If you are not comfortable committing a large sum of money in one transaction, you can always DCA first until you make a decision.

The link you showed explains it that way because it is attempting to calculate a TWR for a fund.

If you look at the mathematical formula shown on the page for the calculation, you can see that it is a compounded ROI of subperiods: R = [(1+r1)(1+r2)...(1+rn)]-1. You can also see that the definition for r1...rn is the ROI for a single subperiod: (value_curr + income - input + output)/value_prev. In their formula they’re using unit price (or NAV) for value_curr and value_prev.
Yes to calculate the TWR that is what we must do. There are 6 subperiods in that table. We need to get the ROI for each subperiods minus the net deposit and compound those. The Feb-May subperiod ROI = ((3134.15 - 2000)/1023)-1 = 0.1086 = 10.86%. The granularity of the subperiods is entirely up to us.

If we want the performance of RM 1 from the beginning until the end, we can just multiply each month’s return to get the final 17.06%. Alternatively if we have no deposits past the first month, calculating the TWR on a monthly subperiod will just give you the same 17.06%.
This isn’t correct. MWR being higher or lower than TWR has nothing to do with rebalancing nor timing the market. The calculation for MWR seeks to find a rate of return (called the discount rate) so that the total cash inflow equals total cash outflow; in other words the net present value of all inflows and outflows equal 0. I have an old post that shows how this is computed manually. If you have Excel or GSheets, you can just use the function XIRR to compute this easily.

Whether DCA’ing is better versus Lump Sum, or whether a higher DCA frequency is better depends entirely on opportunity costs and the increase/decrease of the average price you’re buying at. As such, DCA’ing into a market that is progressively more expensive will increase your average price; increased cost means your returns would be less. On the other hand, a market that is trending down will result in lower average prices. It should be obvious that if the market is going to be much more expensive 5 months later, a Lump Sum right now would result in lower prices.

Thanks a lot for the simple and straight forward explanation. It's clear for beginner / not an investment savvy guy. Now it makes more sense.
I did increase my DCA amount lately, and I guess because my top up are during the days down.
Again, thank you!