Accurately measure your personal investment performance (MWRR)
1. Portfolio Details
The date you began this portfolio or measurement period.
Value of the portfolio at the start date.
2. Cash Flows (Contributions & Withdrawals)
Date
Type
Amount ($)
Action
Add deposits (contributions) or withdrawals made during the period.
3. Ending Balance
The date you are valuing the portfolio.
Current market value of the portfolio.
Money Weighted Rate of Return (Annualized)
–%
Calculated using the XIRR method, accounting for the timing of all cash flows.
Net Profit/Loss
—
Total Invested Capital
—
Simple Return (ROI)
—
Cash Flow Timeline
Money Weighted Rate of Return Calculation: The Complete Guide
Understanding the true performance of an investment portfolio can be challenging when you regularly add or withdraw funds. The money weighted rate of return calculation (MWRR) is the gold standard for individual investors wanting to know exactly how their personal timing and cash flow decisions have impacted their wealth. Unlike simple returns, MWRR accounts for the fact that a 10% gain on $100,000 is more significant to your wealth than a 10% gain on $1,000.
What is Money Weighted Rate of Return Calculation?
The Money Weighted Rate of Return (MWRR) is a measure of the performance of an investment that accounts for the timing and size of all cash flows into and out of the portfolio. In financial terms, it is equivalent to the Internal Rate of Return (IRR).
This metric is particularly useful for:
Individual Investors: Who contribute monthly to retirement accounts or withdraw funds for living expenses.
Private Equity: Where capital calls and distributions occur at irregular intervals.
Performance Analysis: To see if an investor's timing (buying low, selling high) added value compared to a buy-and-hold strategy.
Common Misconceptions
Many investors confuse MWRR with the Time Weighted Rate of Return (TWRR). TWRR eliminates the effect of cash flows to measure the manager's performance purely based on investment selection. MWRR, however, measures the investor's actual experience. If you add money right before a market crash, your MWRR will suffer more than the TWRR, reflecting the poor timing of the contribution.
Money Weighted Rate of Return Formula and Math
There is no simple algebraic formula to solve for MWRR directly. Instead, it requires solving for the rate ($r$) that sets the Net Present Value (NPV) of all cash flows to zero. This is typically done using an iterative numerical method (like the Newton-Raphson method used in our calculator).
Scenario: Sarah starts with $10,000 on Jan 1st. The market is flat for 6 months. On July 1st, she deposits $90,000. The market rallies 10% in the second half of the year.
Jan 1: Start Value $10,000
July 1: Deposit $90,000
Dec 31: End Value $110,000 (Original $10k grew to $11k? No, total pot grew).
Financial Interpretation: Because the bulk of her money ($90k) was invested right before the rally, her MWRR will be very close to the 10% annual return, heavily weighted by the large capital present during the growth phase.
Example 2: The Unlucky Withdrawal
Scenario: John has $100,000. He withdraws $50,000 just before a 20% market rally. He misses out on the gains on that $50,000.
His MWRR will reflect the return only on the remaining capital. While the fund manager might report a 20% TWRR, John's actual wealth growth in dollar terms is lower relative to his initial capital, though his rate of return on remaining capital is still 20%. However, if he added money before a drop, his MWRR would be significantly lower than TWRR.
How to Use This MWRR Calculator
Enter Start Details: Input the date you opened the account (or the start of the period you are analyzing) and the initial value.
Input Cash Flows: Click "Add Cash Flow" for every deposit or withdrawal.
Select "Contribution" for money you put in.
Select "Withdrawal" for money you took out.
Enter End Details: Input the current date and the current total value of the portfolio.
Review Results: The calculator uses the XIRR algorithm to determine your annualized return.
Key Factors That Affect MWRR Results
Several variables influence the outcome of a money weighted rate of return calculation:
Timing of Cash Flows: Money added just before a period of high returns increases MWRR. Money added before a crash decreases it.
Magnitude of Cash Flows: Large contributions have a heavier "weight" on the return. A 50% return on $100 is negligible if you later lose 10% on $1,000,000.
Market Volatility: High volatility combined with frequent cash flows creates the largest divergence between MWRR and TWRR.
Investment Duration: Over very long periods, the annualized effect of timing luck tends to smooth out, though the dollar impact remains.
Fees and Expenses: Since MWRR is usually calculated on net cash flows, high management fees directly reduce the calculated return.
Dividends Reinvested: Dividends are internal portfolio events. Do not enter them as cash flows unless you withdrew the cash from the account.
Frequently Asked Questions (FAQ)
What is the difference between MWRR and TWRR?
MWRR (Money Weighted) accounts for cash flows and measures the investor's specific performance. TWRR (Time Weighted) ignores cash flows to measure the fund manager's performance.
Why is my MWRR negative when the market is up?
This can happen if you made a large contribution right before a temporary market dip, even if the market was up earlier in the year when you had less money invested.
Should I include dividends as cash flows?
No. If dividends are reinvested or stay in the cash balance of the portfolio, they are not external cash flows. Only include money moving between your bank and your investment account.
Can MWRR be calculated for periods less than a year?
Yes, but the result is typically annualized, which can produce extreme percentage figures for very short periods. It is best used for periods of 1 year or more.
Does this calculator use the XIRR formula?
Yes, this calculator uses the XIRR (Extended Internal Rate of Return) algorithm, which is the standard method for calculating MWRR with irregular dates.
What is a "good" MWRR?
A good MWRR exceeds your benchmark (like the S&P 500) over the same period. If your MWRR is lower than the benchmark's TWRR, your market timing may have detracted from value.
How do taxes affect MWRR?
If you pay taxes out of the portfolio (withdrawals), it lowers MWRR. If you pay taxes from outside funds, the portfolio MWRR looks higher, but your personal net return is lower.
Is MWRR the same as CAGR?
No. CAGR (Compound Annual Growth Rate) only looks at start and end values, ignoring external cash flows. MWRR is necessary when money is added or removed.
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