Time-weighted return measures how well your investments performed, independent of when you added or withdrew money. Money-weighted return reflects your actual experience. Enter each period and this tool computes both from the same cash flows.
| Scenario | Period Returns | TWR | Money-Weighted |
|---|---|---|---|
| Steady 10% both periods | +10%, +10% | 21.00% | 21.00% |
| Deposit before a down period | +20%, -10% | 8.00% | lower (bad timing) |
| Deposit before an up period | +10%, +10% w/ big inflow | 21.00% | higher than TWR |
When performance is identical across periods, TWR and money-weighted return agree. They diverge only because of the size and timing of cash flows.
Time-weighted return (TWR) breaks a portfolio's history into sub-periods separated by each cash flow, computes the return of each sub-period in isolation, then chains them together by compounding. Because each sub-period is measured on a clean starting balance, the result is not influenced by how much money was invested when.
For a period with beginning value B, ending value E, and a contribution C made at the end:
r = (E - C) / B - 1
TWR = (1+r₁)(1+r₂)…(1+rₙ) - 1. Contributions are removed from the ending value so they don't masquerade as gains.
An investor who deposits heavily before a losing period feels the loss far more than the fund's advertised TWR suggests. That is not a reporting error — it is the difference between the strategy's return and the investor's return. Both numbers are correct; they answer different questions.
Mutual funds and ETFs report time-weighted returns because TWR is the only measure that lets you compare a manager's performance against an index fairly. If a fund grew from $10 million to $1 billion during a hot streak, a money-weighted return would be dragged down by all the money that arrived just before a pullback — penalizing the manager for something they do not control. Regulators and the CFA Institute therefore require TWR for performance reporting. GIPS (Global Investment Performance Standards) mandates it.
For individual investors, the practical value is comparison: your brokerage's published "portfolio return" is usually a money-weighted (or a simple modified-Dietz) figure, which is why it can differ from the fund's own reported TWR. Knowing which number you are looking at prevents a common — and expensive — misunderstanding about whether a strategy is actually working.
TWR compounds sub-period returns; it never averages them. A +50% period followed by a -50% period gives a TWR of (1.50 × 0.50) - 1 = -25%, not 0%. Averaging the two returns would show zero and hide real losses — the same arithmetic error that makes volatility drag so damaging over long horizons. This is why the calculator multiplies each period's growth factor rather than summing percentages.
⚠️ Important: This calculator estimates time-weighted and simplified money-weighted returns from the period values you enter. It assumes cash flows occur at period end and does not handle intra-period flows, taxes, or fees unless they are already reflected in the ending values. Results are for performance analysis and are not investment advice.