ETF essentials · 2 minute read
How do I read ETF performance figures correctly?
The short answer
Check the period, currency, income treatment, charges and benchmark before comparing ETF returns. Two figures can look comparable while measuring different things.
Why it matters
ETF performance may be shown as:
- A cumulative return: the total gain or loss over the full period
- An annualised return: the equivalent yearly growth rate over several years
- Calendar-year returns
- Price return, which excludes income
- Total return, which includes reinvested income
Currency can also change the result. A US equity ETF measured in euro may show a different return from the same exposure measured in US dollars.
Performance for an accumulating share class may differ from a distributing share class if the comparison does not treat income consistently.
A simple example
One factsheet shows a five-year cumulative return of 50%. Another shows an annualised return of 8.45% a year. Those figures can describe approximately the same growth but use different formats.
They should not be compared as if both were one-year returns.
What to check
- What start and end dates are used?
- Is the return cumulative or annualised?
- Does it include reinvested income?
- Which currency is used?
- Are charges already reflected?
- Is the benchmark measured on the same basis?
Key term explained
An annualised return converts performance over several years into an equivalent average yearly rate, including compounding. It is not the return earned in every individual year.
Use consistent periods and methods. Otherwise, a performance comparison can be materially misleading.
Our factsheet guide explains how to check the reporting period, benchmark and return basis.
Where possible, confirm important figures against the provider’s current factsheet rather than relying only on a platform summary.