Money-Weighted Return (MWR)
Measures actual investor return including the timing and size of cash flows. Shows your personal performance.
What it means
Money-Weighted Return (MWR), also called Internal Rate of Return (IRR), measures the actual return experienced by an investor, accounting for the timing and size of cash flows. If you added money before a gain or withdrew before a loss, MWR will be higher than TWR.
The math
MWR is the discount rate that makes the present value of all cash flows (including the ending value) equal to the initial investment. It's solved iteratively.
How to read it
- MWR > TWRGood timing - more money invested during gains
- MWR < TWRPoor timing - more money invested during losses
- MWR ≈ TWRCash flows didn't significantly impact returns
Worked example
You invest $10,000 in January. In June, you add $20,000. The fund returns 10% first half, -5% second half. TWR = 4.5%. But because you had more money during the loss, MWR = 1.7%. Your actual experience was worse than the fund's performance.
In context
MWR reflects your personal investment experience—what you actually earned. It's useful for evaluating your own timing decisions and understanding how deposits/withdrawals affected your wealth.
Keep exploring
Time-Weighted Return (TWR)
Measures portfolio performance independent of cash flows. Best for comparing manager performance.
Annualized Return
The geometric average return per year, allowing comparison of returns over different time periods.
Total Return
The complete return on an investment including price appreciation and income (dividends, interest).
Risk-Adjusted Return
Return measured relative to the risk taken. Allows fair comparison between investments with different risk levels.
Benchmark
A standard (like S&P 500) used to measure portfolio performance. Enables apples-to-apples comparison.
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