You will be able to work out your return in SGD with FX moves and withholding included.
If you hold US shares or funds, the return your broker app shows and the return you work out yourself will often disagree. Both can be correct, because they answer different questions. A broker app typically reports what your holdings did in US dollars, and it may use a simple calculation that ignores when your money went in. If you earn and spend in Singapore dollars, the return you should care about is the one measured in Singapore dollars, and that figure has to account for currency, withholding tax, costs and the timing of your contributions.
Take Rachel, who lives in Singapore, earns and spends in Singapore dollars, and holds US investments. Her broker app says her US holdings are up 9% this year (all of Rachel's figures here are made up). Her own spreadsheet, built from her records in lesson 7.1, shows a different number, and she wants to know which of the two is true and why they differ.
Record every purchase in both currencies: the US dollar cost and the Singapore dollar amount that actually left your account. Take the Singapore dollar amount from the conversion record or the trade confirmation. Don't convert old purchases at today's exchange rate. Doing that hides the currency move covered in lesson 2.3, "Currency risk is not the same as conversion cost", and produces a return that never happened. The rate you actually received also captures the spread you paid, because the spread is built into that rate.
Record each dividend net. A net dividend is the amount you received after withholding. On US dividends 30% is withheld, as lesson 3.1 showed, so recording the gross amount overstates your income. Convert each dividend to Singapore dollars at the rate you actually converted it at, or at that day's rate if you kept it in US dollars, and note beside the row which of the two methods you used.
Also record every sale and every fee that moved money in or out. A Singapore dollar return built from these records includes price changes, net dividends, currency moves and every cost you paid, because each one changed either what went out or what came back.
A simple return treats money added partway through the year as if it had been invested all year, so it misstates how hard your money worked. Suppose you invest S$4,000 in January and S$4,000 in July, and the total is worth S$8,700 at year end. The simple gain is S$700 on S$8,000, or 8.75%. The July money was invested for only half the year, so in this case the simple figure understates the return.
To correct for this, use a money-weighted return: the single yearly rate that, applied to each sum for exactly as long as it was invested, produces the final value. You calculate it with XIRR, a function in both Excel and Google Sheets that takes a list of dates and amounts. Regular contributions need no extra work, since each one is just another dated row. This is the main reason to prefer XIRR, as a simple calculation gets more wrong the more often you add money.
Build a sheet with a date column and a Singapore dollar amount column. Enter money going in as a negative number and money coming back as a positive number. Add the year-end value of your holding, converted at the year-end rate, as a final positive row dated the last day of the period, as if you sold the holding that day. Then apply XIRR to the amounts and dates.
The method only works if the rows are complete. Every purchase, sale, dividend and fee that moved money in or out needs a row. A missed purchase makes the return look better than it was and a missed dividend makes it look worse, so your complete records from lesson 7.1 have to come first.
On 15 January Rachel bought US$3,000 of a fund at S$1.34, so S$4,020 left her account. On 15 July she bought another US$3,000 at S$1.36, costing S$4,080. On 15 December she received a dividend of US$60 gross, of which US$18 was withheld, leaving US$42 net, which she converted at S$1.35 to get S$56.70. On 31 December her holding was worth US$6,500, which is S$8,645 at a rate of S$1.33. Her sheet has four rows, and XIRR on them gives about 10.6% a year:
15 Jan: -S$4,020 15 Jul: -S$4,080 15 Dec: +S$56.70 31 Dec: +S$8,645
A simple US dollar return gives a different figure. She put in US$6,000 and ended with US$6,500 plus US$42 in dividends, which is US$6,542, a gain of about 9.0%. A simple Singapore dollar return that ignores timing gives a third figure: she put in S$8,100 and ended with S$8,701.70, a gain of about 7.4%.
The same year therefore produces about 9.0% simple in US dollars, about 7.4% simple in Singapore dollars, and about 10.6% using XIRR in Singapore dollars. The XIRR is higher than the simple Singapore dollar figure because half her money was invested for only half the year and did well during that time. The Singapore dollar XIRR is the number that answers Rachel's question, because it accounts for currency, withholding, costs and timing.
Your activity is to enter your last year of overseas transactions into a sheet with a date column and a Singapore dollar amount column, add the year-end value as the final row, and calculate your XIRR.
Put last year's overseas transactions into a sheet with their dates and SGD amounts, then work out your XIRR.
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