Performance & Return
Money-Weighted Return
Definition
A return measure that accounts for the timing and size of cash flows into and out of the portfolio.
Money-weighted return solves for the internal rate of return generated by the investor's actual capital path, making it sensitive to when cash entered or left the portfolio.
Why it matters
It tells you the return you actually experienced as an investor given when you added or withdrew capital.
What most investors miss
The gap between what the term means and how it is usually applied.
They use time-weighted return when they want to evaluate their own investment decisions. Money-weighted return is the right tool for that.
How to read it
Use money-weighted return when the question is how did my actual invested capital perform. Use time-weighted when comparing a manager or strategy.
Multi-account lens
How this term reads differently across brokers and accounts.
Across accounts money-weighted return requires tracking every cash flow in and out of every account. Missing one changes the result.
Concrete example
What this looks like with real numbers.
Scenario
An investor puts £50,000 to work in January (market up 22% that year) then adds £200,000 in November just before a 9% drawdown. Time-weighted return: +14%. Money-weighted return: +3.8% — because 80% of capital arrived near the peak.
What it reveals
MWR answers the investor's actual experience. Large late contributions mean the dollar-weighted return diverges sharply from the strategy's headline number.
Related terms
Terms that connect to money-weighted return.
Time-Weighted Return
A return measure that removes the effect of cash flows to show the performance of the investment strategy itself.
Total Return
The complete return from a portfolio including price appreciation income distributions and cash interest.
Portfolio Performance
The overall return of the portfolio over a defined period accounting for all holdings cash and distributions.
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