Fundrise launches performance track record tool for transparency

Fundrise has emerged as a pioneering platform in the realm of real estate investment, boasting over 220,000 clients and managing assets exceeding $2.5 billion. Recently, the firm has introduced an innovative performance track record tool, designed to enhance transparency for its investors.

In an environment marked by stock market fluctuations and negative real mortgage rates, my investment strategy is increasingly focused on preserving capital and diversifying through real estate funds. The recent drop in 10-year bond yields below 1.4% is beneficial for the real estate sector, further solidifying its appeal.

As a proud partner of Financial Samurai, we present insights into our latest advancement.

For all the technological advancements in investing due to fintech, one fundamental question persists among discerning investors: What will my investment returns look like? While investment firms often provide projections based on historical data, the inherent unpredictability of the market remains a constant.

Traditionally, finance firms offer a glimpse into past performance, typically presenting average historical returns. However, we have taken this concept to a new level by launching a tool that enables Fundrise members to track the real-time performance of individual client accounts.

This innovative tool moves beyond the conventional approach of aggregating all individual accounts into a single return percentage. Instead, it allows users to view specific performance data for each individual investor who has ever invested through Fundrise, providing a richer context for understanding returns.

These data points are not selectively chosen; they are automatically populated by the tool, reflecting the performance of all Fundrise clients whose portfolios meet the tool's criteria.

Exploring Real-Time Returns of Fundrise Client Accounts

An illustrative screenshot captured on 12/17/2021. For an interactive experience, visit the Fundrise Track Record. For additional insights about the assumptions underlying this tool, please refer to the disclosures at the end of this article.

The real-time nature of the tool means that it updates daily, providing a more accurate representation of investor experiences. Users can click on various points in the tool to access key information about specific investors represented by those data points.

This dynamic approach allows users to track performance shifts and trends over time, rather than relying on quarterly snapshots. While certain times of the year may see fluctuations in account values due to events such as dividend distributions, the tool ensures that users have access to up-to-date information without having to wait for new average performance metrics.

Understanding Fundrise Performance Through Individual Client Snapshots

To illustrate the capabilities of our performance tool, we present a randomly selected profile of an investor who has been on our platform for two years. This sample reflects an average return percentage for such investors, though we have blurred the specific cumulative return figure to maintain confidentiality.

This level of detail in showcasing real investors' ongoing portfolio performance is unparalleled in the investment industry. It embodies what we define as "radical transparency"—not just a marketing term, but genuine data that informs investors' decisions.

Curious to explore the interactive tool? You can do so here. Note that while the tool is intended for Fundrise account holders, signing up is free, and no initial investment is necessary.

Upon accessing the tool, you'll find that it defaults to a condensed view to exclude extreme outliers on the positive end, making the data more digestible. To see the complete chart, simply click the plus sign icon located in the upper left corner.

Why Average Returns May Not Provide a Comprehensive Overview

While historical returns presented as a single percentage can be useful, they often fail to capture the nuances of individual investor experiences. Averages can illustrate overall trends, but they can obscure the reality of what various investors experience over time.

For instance, consider the asset class return chart published by BlackRock, which highlights the performance of multiple indices over a span of twenty years. While the presentation conveys essential insights into diversification, it does little to reflect the true variance in individual investor experiences year-to-year.

When examining averages, one must consider that these figures can mask the reality of personal investment journeys. The scatter plot feature of our tool places individual experiences at the forefront, allowing for a clearer understanding of investment performance.

By emphasizing individual returns, our scatter plot facilitates a level of precision often lost when focusing solely on averages. For a deeper dive, check out our overview of Fundrise.

The Misleading Nature of Averages in Investment Performance

While averages can serve as a valuable tool for gauging trends, they can also misrepresent true performance due to the influence of outliers. For instance, consider a hypothetical scenario where two extraordinarily wealthy individuals, such as Warren Buffett and Oprah Winfrey, move to a small town with an average household income of $46,341. Suddenly, the average income rises to $75,263 without any real change in the financial situation of the town's residents.

This example illustrates why it's essential to assess individual performance rather than relying solely on averages. In real estate, we often emphasize median home prices for this very reason, as these figures provide a clearer picture of market conditions without being skewed by high-value properties.

Correlation Between Returns and Time on Fundrise Platform

The scatter plot also reveals a significant trend: there is a strong correlation between the length of time an investor has been on the Fundrise platform and their annual returns. Generally, investors not only see their returns accumulate over time but also experience an increasing rate of return each year.

The track record tool allows for detailed tracking of this phenomenon, displaying all data points based on the duration of each investor's engagement with the platform. The results indicate a clear growth trajectory for investors as they spend more time with Fundrise.

For instance, the tool currently shows that investors' accounts tend to grow at an increasing rate from year one to year five, thereby illustrating the benefits of long-term investing.

Enhancing Transparency and Fostering Trust

Our primary goal with the track record tool is not just to inform you about potential returns, but also to address the broader question that prospective investors may have: What does it mean to invest with Fundrise?

Investing with us signifies a commitment to transparency and open communication. Our dedication to providing comprehensive information has led us to:

• Publish detailed communications regarding every individual investment property on our platform.
• Engage publicly in discussions about our investment strategies, particularly during significant market events like the COVID-19 pandemic.
• Lower the barrier to entry for new investors by allowing starter portfolios to begin at just $10, making real estate investment accessible to a wider audience.

Start your investment journey with Fundrise today and visualize your financial future.

^{1 This tool aims to provide transparency for potential clients and interested parties regarding the performance of other clients' accounts.}

^{Individual results may vary significantly, and past performance does not guarantee future results. Every investment carries risks, which may lead to a partial or total loss of capital.}

^{The data in the chart reflects the cumulative time-weighted returns of individual Fundrise client accounts, calculated using the Modified Dietz method, from the day the account began investing until the present, or in cases of full redemption, until the last day the account held shares. This data includes specific inputs like fees, penalties, and individual investment decisions.}

^{Performance calculations exclude project-dependent notes, investments in Rise Companies (the "Fundrise iPO"), or the Fundrise Opportunity Fund.}

^{The chart does not represent the performance of any specific investment program (e.g., an eREIT) sponsored by Rise Companies. Fundrise Performance is an original post by FS.}

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