Time Weighted Performance Calculator | Accurate TWR Return Tool
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Cumulative Time-Weighted Return (TWR)
0.00%
Formula Used: TWR = [(1 + r₁) × (1 + r₂) × (1 + r₃)] – 1
This method links the sub-period returns geometrically, effectively isolating investment performance from the timing and size of your deposits or withdrawals.
Performance Breakdown
| Period |
Start Value |
End (Pre-Flow) |
Cash Flow |
Period Return |
Table: Detailed breakdown of valuation and returns for each sub-period.
Growth of $1,000 (Indexed)
Chart: Cumulative growth of a hypothetical $1,000 investment based on your TWR.
What is Time Weighted Performance Calculation?
Time Weighted Performance Calculation, commonly known as Time-Weighted Return (TWR), is the global industry standard for measuring the performance of investment portfolios. Unlike simple returns or money-weighted returns (IRR), TWR eliminates the distorting effects of cash inflows and outflows (deposits and withdrawals) on the calculated performance.
This method is essential for investors who want to evaluate the skill of a fund manager or the performance of a strategy objectively. Because a portfolio manager usually cannot control when a client deposits or withdraws money, TWR ensures their performance record is not penalized or artificially boosted by the timing of those cash flows.
Who Should Use TWR?
- Investment Advisors: To report performance to clients fairly.
- Individual Investors: To compare their portfolio performance against market benchmarks like the S&P 500.
- Fund Managers: To comply with GIPS (Global Investment Performance Standards).
Time Weighted Return Formula and Explanation
The calculation involves breaking the total time frame into sub-periods. A new sub-period begins every time an external cash flow occurs. The returns for these sub-periods are calculated individually and then "chained" (geometrically linked) together.
Formula:
TWR = [(1 + r₁) × (1 + r₂) × … × (1 + rₙ)] – 1
Where r is the return for a sub-period, calculated as:
r = (End Value – Start Value) / Start Value
| Variable |
Meaning |
Typical Unit |
| Start Value |
Portfolio value at the beginning of a sub-period |
Currency ($) |
| End Value |
Portfolio value just before a cash flow occurs |
Currency ($) |
| Cash Flow |
External money added (+) or removed (-) |
Currency ($) |
| r (sub-period) |
The percentage return for that specific interval |
Percentage (%) |
Practical Examples
Example 1: The Lucky Deposit
Imagine you start with $10,000. In Period 1, the market stays flat, and you have $10,000. You then deposit $90,000. In Period 2, the market jumps 10%.
- Money-Weighted View: Your portfolio gained $10,000 (10% on $100k). Since most of your money was invested during the rally, your personal return feels high.
- Time-Weighted View:
Period 1 Return: ($10k – $10k)/$10k = 0%.
Period 2 Return: 10%.
Total TWR: (1 + 0) × (1 + 0.10) – 1 = 10%.
TWR accurately reflects that the strategy returned 10%, regardless of the fact that you added a huge sum right before the jump.
Example 2: Volatility with Withdrawals
You start with $100,000. The portfolio drops to $80,000 (-20%). You panic and withdraw $40,000, leaving $40,000. The portfolio then rebounds 25% to $50,000.
- Sub-period 1: ($80k – $100k)/100k = -20%.
- Sub-period 2: ($50k – $40k)/40k = +25%.
- TWR Calculation: (1 – 0.20) × (1 + 0.25) – 1 = (0.80 × 1.25) – 1 = 0%.
Even though you lost money in absolute dollars because you withdrew at the bottom, the time weighted performance calculation shows a 0% return, indicating the portfolio manager effectively broke even on the underlying assets.
How to Use This Calculator
- Enter Initial Investment: Input the starting value of your account.
- Input Period Details: For each period, enter the value of the portfolio before any cash movement occurred.
- Add Cash Flows: Enter the net amount deposited (positive) or withdrawn (negative) at the end of that period.
- Check Results: The tool calculates the holding period return for each segment and links them to give you the cumulative TWR.
- Review the Chart: The graph shows how a hypothetical $1,000 investment would have grown based on these returns.
Key Factors That Affect TWR Results
- Market Volatility: High volatility in sub-periods compounds geometrically. A 50% loss requires a 100% gain to recover.
- Valuation Frequency: The more frequently you value the portfolio (e.g., daily vs. monthly), the more accurate the TWR, especially during volatile markets.
- Fees and Expenses: TWR is usually calculated "net of fees" for clients. Ensure your End Values reflect management fees deducted from the account.
- Timing of Dividends: Reinvested dividends are not external cash flows; they are part of the portfolio's internal growth. Do not enter dividends as "Cash Flow" unless you withdrew them.
- New Issues/IPOs: For funds, access to "hot" IPOs can spike a sub-period return significantly, influencing the total TWR.
- Tax Payments: If taxes are paid out of the account, they are withdrawals. If paid separately, they don't affect TWR directly, though they affect your net wealth.
Frequently Asked Questions (FAQ)
Q: Why is TWR different from my brokerage statement return?
A: Brokerages often use Money-Weighted Return (MWR) or simple returns, which account for your specific deposit timing. TWR ignores timing to show the strategy's raw performance.
Q: Can TWR be negative even if I made money?
A: Yes. If you had a small balance during a huge gain and a large balance during a small loss, you might have made absolute profit, but the TWR (linking the percentages) could be negative.
Q: Is TWR better than IRR?
A: It depends. Use TWR to judge the fund manager. Use IRR (Internal Rate of Return) to judge your personal financial growth including your timing decisions.
Q: How do I handle dividends?
A: If dividends remain in the account, they are part of the "End Value". Do not add them as a "Cash Flow". Only treat them as Cash Flow if you withdraw the cash.
Q: What if I don't have exact valuations at the time of cash flows?
A: This is common. You can use the "Modified Dietz" method as an approximation, but true TWR requires valuation at the moment of cash flow.
Q: Does this calculator handle annualization?
A: This specific tool calculates Cumulative TWR. To annualize, you would take (1 + TWR)^(1/years) – 1.
// Initialize calculator
document.addEventListener('DOMContentLoaded', function() {
calculateTWR();
});
function calculateTWR() {
// 1. Get Inputs
var initial = parseFloat(document.getElementById('initialValue').value);
var p1End = parseFloat(document.getElementById('p1EndValue').value);
var p1Flow = parseFloat(document.getElementById('p1CashFlow').value);
var p2End = parseFloat(document.getElementById('p2EndValue').value);
var p2Flow = parseFloat(document.getElementById('p2CashFlow').value);
var p3End = parseFloat(document.getElementById('p3EndValue').value);
// Validation limits
var errInitial = document.getElementById('err-initial');
if (isNaN(initial) || initial = 0) {
el.style.color = "#28a745"; // Success green
} else {
el.style.color = "#dc3545″; // Error red
}
}
function updateTable(v0, v1, cf1, r1, v2_start, v2, cf2, r2, v3_start, v3, r3) {
var tbody = document.getElementById('tableBody');
tbody.innerHTML = ";
var rows = [
{ id: 1, start: v0, end: v1, flow: cf1, ret: r1 },
{ id: 2, start: v2_start, end: v2, flow: cf2, ret: r2 },
{ id: 3, start: v3_start, end: v3, flow: 0, ret: r3 }
];
for (var i = 0; i < rows.length; i++) {
var row = rows[i];
var tr = document.createElement('tr');
var flowText = i === 2 ? "-" : formatMoney(row.flow);
tr.innerHTML =
'
Period ' + row.id + ' | ' +
'
' + formatMoney(row.start) + ' | ' +
'
' + formatMoney(row.end) + ' | ' +
'
' + flowText + ' | ' +
'
' + (row.ret * 100).toFixed(2) + '% | ';
tbody.appendChild(tr);
}
}
function formatMoney(num) {
return '$' + num.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
}
function resetCalculator() {
document.getElementById('initialValue').value = 100000;
document.getElementById('p1EndValue').value = 105000;
document.getElementById('p1CashFlow').value = 10000;
document.getElementById('p2EndValue').value = 118000;
document.getElementById('p2CashFlow').value = -5000;
document.getElementById('p3EndValue').value = 120000;
calculateTWR();
}
function copyResults() {
var txt = "Time Weighted Performance Results:\n";
txt += "Total TWR: " + document.getElementById('totalTWR').innerText + "\n";
txt += "Period 1: " + document.getElementById('p1Return').innerText + "\n";
txt += "Period 2: " + document.getElementById('p2Return').innerText + "\n";
txt += "Period 3: " + document.getElementById('p3Return').innerText + "\n";
navigator.clipboard.writeText(txt).then(function() {
var btn = document.querySelector('.btn-copy');
var originalText = btn.innerText;
btn.innerText = "Copied!";
setTimeout(function() { btn.innerText = originalText; }, 2000);
});
}
// Canvas Chart Implementation
function drawChart(r1, r2, r3) {
var canvas = document.getElementById('twrChart');
var ctx = canvas.getContext('2d');
// Handle High DPI scaling
var dpr = window.devicePixelRatio || 1;
var rect = canvas.getBoundingClientRect();
canvas.width = rect.width * dpr;
canvas.height = rect.height * dpr;
ctx.scale(dpr, dpr);
var width = rect.width;
var height = rect.height;
// Clear canvas
ctx.clearRect(0, 0, width, height);
// Data Generation: Indexed growth of $1000
var base = 1000;
var v0 = base;
var v1 = v0 * (1 + r1);
var v2 = v1 * (1 + r2);
var v3 = v2 * (1 + r3);
var dataPoints = [v0, v1, v2, v3];
var labels = ["Start", "Pd 1", "Pd 2", "Pd 3"];
// Find min/max for scaling
var maxVal = Math.max(v0, v1, v2, v3) * 1.1;
var minVal = Math.min(v0, v1, v2, v3) * 0.9;
if (minVal > 0) minVal = 0; // Keep baseline at 0 usually
var padding = 40;
var chartW = width – (padding * 2);
var chartH = height – (padding * 2);
// Draw Axes
ctx.beginPath();
ctx.strokeStyle = "#ccc";
ctx.moveTo(padding, padding);
ctx.lineTo(padding, height – padding); // Y axis
ctx.lineTo(width – padding, height – padding); // X axis
ctx.stroke();
// Draw Line
ctx.beginPath();
ctx.strokeStyle = "#004a99";
ctx.lineWidth = 3;
var stepX = chartW / (dataPoints.length – 1);
for (var i = 0; i < dataPoints.length; i++) {
var val = dataPoints[i];
// Normalize Y: (val – min) / (max – min)
var normY = (val – minVal) / (maxVal – minVal);
var x = padding + (i * stepX);
var y = (height – padding) – (normY * chartH);
if (i === 0) ctx.moveTo(x, y);
else ctx.lineTo(x, y);
// Save coords for points
dataPoints[i] = { x: x, y: y, val: val };
}
ctx.stroke();
// Draw Points & Labels
for (var i = 0; i < dataPoints.length; i++) {
var p = dataPoints[i];
// Dot
ctx.beginPath();
ctx.fillStyle = "#fff";
ctx.strokeStyle = "#004a99";
ctx.lineWidth = 2;
ctx.arc(p.x, p.y, 5, 0, Math.PI * 2);
ctx.fill();
ctx.stroke();
// Value Label
ctx.fillStyle = "#333";
ctx.font = "bold 12px sans-serif";
ctx.textAlign = "center";
ctx.fillText("$" + Math.round(p.val), p.x, p.y – 15);
// X Axis Label
ctx.fillStyle = "#666";
ctx.font = "12px sans-serif";
ctx.fillText(labels[i], p.x, height – padding + 20);
}
}