Time weighted return vs money weighted return: a worked example

Manu Martínez-Almeida — Mon, 14 Sep 2026 00:00:00 GMT

Money weighted return (MWR) measures how your money grows, including how much you invest and when. Time weighted return (TWR) measures how investments perform, setting aside how much money you add or withdraw and when.

Your fund can report a positive year while you lose euros, because more of your money was invested during the fall than during the rise.

Why do TWR and MWR give different answers?

Imagine you start with €10,000. Your investments rise 10% in the first half of the year, so you have €11,000. You add €5,000, then the whole €16,000 falls 5%, leaving €15,200.

You put in €15,000 and gained €200. In this illustrative year, TWR is 4.5% and MWR is about 1.6%. The extra €5,000 arrives after the rise and participates only in the fall.

Move the deposit to the start in the figure. Both returns become 4.5%, because all your money now experiences the whole year.

[Interactive figure — view it at https://trymarisco.com/blog/time-weighted-vs-money-weighted-return/]

The gap can persist for years. Here, the two rates nearly agree over the latest year, when no new money arrived. Over three years, earlier deposits make a difference.

Demo portfolio · EUR · history Jan 2023–Sep 2026

How do you calculate time weighted return?

Calculate the return between deposits and withdrawals, then combine the returns: add 1 to each, multiply, and subtract 1. Each stretch starts just after money moves and ends just before it moves again:

\begin{aligned} \mathrm{TWR} &= (1 + 10\%) \times (1 - 5\%) - 1 \\ &= 4.5\% \end{aligned}

The answer is 4.5%, rather than 5%, because the fall applies to the larger balance after the rise.

The €5,000 deposit starts a new stretch. Buying shares with cash already inside the portfolio does not count as adding money.

How do you calculate money weighted return?

MWR finds one yearly growth rate that fits your deposits and ending balance. This calculation is called the internal rate of return (IRR).

Your first €10,000 is invested for a year; the extra €5,000 for half a year. The yearly rate $r$ solves:

\begin{aligned} 15{,}200 &= 10{,}000(1+r) \\ &\quad + 5{,}000\sqrt{1+r} \\ r &\approx 1.6013\% \text{ per year} \end{aligned}

Dividing the €200 gain by €15,000 gives 1.33%, but ignores when the money arrived.

For real dates, Excel's XIRR(values, dates) calculates a rate per year. Enter deposits as negative amounts, withdrawals as positive, and the ending value as a final positive amount. For a portfolio you already owned at the start, include its opening value as a negative amount too.

XIRR uses a 365-day year; our example uses equal half-years, so calendar dates can change the answer slightly. A failed calculation means the rate is unknown, not zero.

Is money weighted return the same as IRR?

They are the same calculation. MWR is the internal rate of return of your own cash flows: each deposit and withdrawal, plus the ending value, on their dates. Broker and fund reports use either name, or "personal rate of return", and XIRR is the spreadsheet version. What varies is presentation and day count. Some quote it for the whole period, others as a rate per year, and each broker picks its own calendar.

Can money weighted return be negative when TWR is positive?

Yes. Set the halfway deposit to €10,000. You contribute €20,000 in total and finish with €19,950: a €50 loss and MWR of about −0.33%. TWR stays at 4.5%.

You have €21,000 exposed to the second-half loss, compared with €10,000 exposed to the first-half gain. The CFA Institute's comparison of TWR and IRR discusses why the measures can even have opposite signs.

A lower MWR does not prove poor investing skill. Your deposit could reflect payday or a house sale. These past returns cannot tell you when to make the next deposit.

In the portfolio above, most of the money added during the three-year period arrived after a strong 2024. That earlier growth helped fewer euros.

Demo portfolio · EUR · 14 Sep 2026

What changes if the fall comes first?

Keep the €5,000 halfway deposit, but swap the returns: −5% first, then +10%. You finish with €15,950 instead of €15,200. MWR rises from about 1.6% to 7.6%, while TWR stays at 4.5%.

Multiplication works in either order, so TWR gives the same answer. Your deposit makes the order matter to your euros: this time the extra €5,000 participates in the rise. That is €750 more from the same two investment returns.

Is TWR the same as CAGR?

Only when no money moves. Compound annual growth rate (CAGR) takes one starting amount and one ending amount and finds the yearly rate between them. With no deposits or withdrawals, CAGR, annualised TWR and MWR are the same number. Add a deposit and the CAGR of your balance stops measuring performance, because part of the growth is money you put in. TWR removes the deposit, while MWR keeps it and weights it by how long it was invested.

Which return do you use to compare with an index?

Use TWR to compare investment performance with a market index. MWR tells you how your money grew with your own deposit dates included.

Compare the same dates and currency. Check whether both figures include payouts from investments and deduct fees. A gain over three years is also different from a rate per year.

Judge a TWR against an index of the same kind of assets, over the same dates: a portfolio of world funds against a world index, not against the S&P 500, which tracks large US companies. The example's 4.5% would look strong in a year when that index fell 5% and weak in one when it gained 20%.

Schooling explains the measures you'll find in Marisco's Performance report, which includes TWR and MWR for the same reporting windows.

Schooling | Marisco