LESSON 10.6 · ADVANCED

Time-weighted vs money-weighted return

One judges the portfolio. The other judges your timing.

MEASURING PERFORMANCE HONESTLY4 MIN READ

Adding and withdrawing money distorts a simple return, and there are two ways to deal with it. A time-weighted return measures each stretch between cash flows separately and chains them together, so it shows how the investments did regardless of when money came in or out. That judges the portfolio, or a fund manager. A money-weighted return weights each stretch by how much money was invested at the time, so it shows the return you actually got. It's usually worked out as an IRR, or internal rate of return.

They differ when timing matters. Put a large sum in just before a fall and your money-weighted return will be worse than the time-weighted one: the investments did fine overall, but most of your money arrived for the bad part. That makes the money-weighted return the judge of your timing. Neither figure appears in the app. Its Return is a simple value-minus-cost figure, and its Annualised Growth treats all your money as invested from your first purchase.

Time-weighted · judges the investmentsMoney-weighted · judges your timing

Same portfolio, same period. Different questions, different numbers.

See your portfolio's value over time →

Educational content only. It is not personal financial advice.