Enter deposits as positive numbers, withdrawals as negative numbers.
Dollar-Weighted Rate of Return (IRR)
0.00%
function calculateDWRR() {
// 1. Get Inputs
var startVal = parseFloat(document.getElementById('startValue').value);
var endVal = parseFloat(document.getElementById('endValue').value);
var durationMonths = parseFloat(document.getElementById('duration').value);
// Cash Flows
var cf1 = parseFloat(document.getElementById('cf1_amt').value) || 0;
var t1 = parseFloat(document.getElementById('cf1_month').value) || 0;
var cf2 = parseFloat(document.getElementById('cf2_amt').value) || 0;
var t2 = parseFloat(document.getElementById('cf2_month').value) || 0;
var cf3 = parseFloat(document.getElementById('cf3_amt').value) || 0;
var t3 = parseFloat(document.getElementById('cf3_month').value) || 0;
// Validation
if (isNaN(startVal) || isNaN(endVal) || isNaN(durationMonths) || durationMonths <= 0) {
alert("Please enter valid starting value, ending value, and duration.");
return;
}
// 2. Prepare Data Structure for Calculation
// We normalize everything to the end of the period.
// Equation: EndVal = StartVal*(1+r)^T + CF1*(1+r)^(T-t1) + …
// Note: T is usually 1 if we want annualized, but let's solve for the periodic rate first, then annualize?
// Standard DWRR is IRR.
// IRR function: 0 = -StartVal + CFs/(1+r)^t + EndVal/(1+r)^T
// Let's use the XIRR approach logic but simplified for months.
// Time is expressed in fraction of years relative to start date.
var totalYears = durationMonths / 12.0;
// Define flows: { amount: number, timeInYears: number }
// Start value is an inflow to the portfolio (negative for the investor wallet, positive for the calculation equation setup usually)
// Standard IRR setup:
// t=0: -StartVal
// t=n: +CashFlows
// t=End: +EndVal
var flows = [];
flows.push({ amt: -startVal, t: 0 }); // Initial Investment
if (cf1 !== 0) flows.push({ amt: -cf1, t: t1 / 12.0 }); // Deposit is input (negative in IRR calc as it's an investment)
if (cf2 !== 0) flows.push({ amt: -cf2, t: t2 / 12.0 });
if (cf3 !== 0) flows.push({ amt: -cf3, t: t3 / 12.0 });
flows.push({ amt: endVal, t: totalYears }); // Final Value retrieved
// 3. Numerical Solver (Bisection Method) for IRR
// We want to find rate 'r' such that NPV = 0
// NPV = Sum ( Flow / (1+r)^t )
var low = -0.9999; // -99.99%
var high = 10.0; // 1000%
var epsilon = 0.0000001;
var maxIter = 1000;
var guess = 0;
var found = false;
for (var i = 0; i < maxIter; i++) {
guess = (low + high) / 2;
var npv = 0;
for (var j = 0; j < flows.length; j++) {
npv += flows[j].amt / Math.pow(1 + guess, flows[j].t);
}
if (Math.abs(npv) 0, we need a higher rate.
if (npv > 0) {
low = guess;
} else {
high = guess;
}
}
// 4. Output formatting
var resultElement = document.getElementById('result');
var valueElement = document.getElementById('dwrrResult');
var summaryElement = document.getElementById('calculationSummary');
resultElement.style.display = 'block';
if (found || (high – low) < 0.001) {
// Check if user wanted annualized or period return
// The solver finds the Annualized Effective Rate because we used 't' in years.
var percent = (guess * 100).toFixed(2);
valueElement.innerHTML = percent + "% (Annualized)";
// Generate summary text
var profit = endVal – startVal – cf1 – cf2 – cf3;
summaryElement.innerHTML = "Net Profit/Loss: $" + profit.toFixed(2);
} else {
valueElement.innerHTML = "Error";
summaryElement.innerHTML = "Could not converge on a solution. Please check your inputs.";
}
}
Dollar-Weighted Calculation Methodology: Understanding Your Rate-of-Return
In the world of investment performance measurement, not all percentage signs are created equal. The Dollar-Weighted Rate of Return (DWRR), often synonymous with the Internal Rate of Return (IRR), is a methodology that produces a rate-of-return that specifically accounts for the timing and size of your cash flows.
What is Dollar-Weighted Return?
Unlike a Time-Weighted Return (which mutual funds typically report to ignore the effect of client deposits), the Dollar-Weighted calculation methodology reflects the actual experience of the investor. It answers a specific question: "What constant annual interest rate would make my starting balance and all my deposits grow to equal my ending balance?"
Because it weighs the return by the dollars invested during specific timeframes, it places more emphasis on periods where the portfolio value was larger.
Why This Calculation Methodology Matters
The DWRR produces a rate-of-return that captures the impact of your behavioral decisions:
Timing the Market: If you deposit a large sum of money right before the market surges, your Dollar-Weighted return will be higher than the market average because you had more dollars at work during the growth phase.
Bad Timing: Conversely, if you add money right before a crash, your DWRR will be significantly lower than the Time-Weighted return, because you exposed more capital to the loss.
How the Math Works
The calculation does not have a simple linear formula. Instead, it balances the equation between inflows and outflows using an iterative process (like the one in the calculator above). The core concept equates the Present Value (PV) of your outflows (deposits) to the Present Value of your inflows (withdrawals and ending value):
To calculate your personal performance using this methodology:
Beginning Value: Enter the value of your portfolio at the start of the period.
Ending Value: Enter the current value (or value at the end of the period).
Duration: Specify the total time in months.
Cash Flows: If you added or removed money, enter the amounts and the month they occurred. Use positive numbers for deposits (money you put in) and negative numbers for withdrawals in the calculator logic above, the system handles the math to determine your effective growth rate.