Performance & Return
Time-Weighted Return
Definition
A return measure that removes the effect of cash flows to show the performance of the investment strategy itself.
Time-weighted return compounds sub-period returns between external cash flows, isolating the performance of the invested capital from the investor's contribution timing.
Why it matters
It is the standard for comparing portfolio managers or strategies because it is not distorted by the timing of deposits and withdrawals.
What most investors miss
The gap between what the term means and how it is usually applied.
They use time-weighted return to evaluate their own results. If they added capital at a bad time money-weighted return will reflect that. Time-weighted will not.
How to read it
Use time-weighted return when comparing your portfolio to a benchmark or another strategy. It levels the playing field.
Multi-account lens
How this term reads differently across brokers and accounts.
Calculating time-weighted return across multiple accounts requires complete transaction records from every broker. Gaps in one account corrupt the result.
Concrete example
What this looks like with real numbers.
Scenario
A portfolio grew 28% over three years (TWR). The investor added £120,000 just before two market dips. Money-weighted return: 9.4%. TWR strips out timing distortions to show what the invested strategy returned, independent of cash flow decisions.
What it reveals
TWR is the right metric for comparing strategies or managers. MWR is the right metric for understanding the investor's lived result.
Related terms
Terms that connect to time-weighted return.
Money-Weighted Return
A return measure that accounts for the timing and size of cash flows into and out of the portfolio.
Total Return
The complete return from a portfolio including price appreciation income distributions and cash interest.
Benchmark
A reference index or return used to evaluate whether the portfolio is performing as expected relative to its risk profile.
Continue only if the next question is clearer now
Diagnosis first, then workflow, then fit.
Follow Upogee on X
Product updates, portfolio review ideas, and building notes.