The Cost of Investment is the combined Cost of Investment for all the funds that make up the portfolio.

Here’s how we calculate Cost of Investment for each fund:

The left-hand side of this formula calculates the Weighted Average Cost (WAC) of your investment units, which is the average price you pay for each unit of the fund you currently hold. Here’s an example:

You invest $100 today when the price of each unit is $10, so you bought 10 units.

Next month you invest another $200 when the price of each unit is $12.50, so you bought another 16 units.

Therefore WAC = ($100 + $200)/(10 + 16) = $11.54

Note that the WAC changes each time you buy into the fund as the price of the fund changes daily.

We then multiply the WAC by the current number of units of your fund to compute your Cost of Investment. The number of units could have changed due to withdrawals, because when you make a withdrawal from your investments, the units sold multiplied by the WAC will be reduced from your Cost of Investment.

While Net Deposits is a simpler way to look at how much you have invested (simply your deposits minus your withdrawals over a given time frame), one important drawback of Net Deposits is that it can be a negative number when you have a significant withdrawal. Here’s an example of how it can be confusing:

You invest $100 today when the price of each unit is $100, so you bought 10 units.

Next month the price went up to $12.50 and you sold all 10 units.

Therefore, Net Deposits = $100 – $125 = -$25

Your Net Deposits is now negative which is hard to interpret. Using Cost of Investment, the result will be zero which makes a lot more sense.