Time-Weighted Rate of Return (TWRR) Calculator
Period 1
Period 2 (Optional)
Period 3 (Optional)
Final Valuation
Please check your inputs. Initial value and at least one period end value are required.
Cumulative Time-Weighted Return
0.00%
Period 1: ' + (r * 100).toFixed(2) + '%
';
} else {
// Calculate Period 1
var r1 = (p1End – currentStart) / currentStart;
periodReturns.push(r1);
breakdownHTML += 'Period 1: ' + (r1 * 100).toFixed(2) + '%
';
// Setup for Period 2
if (isNaN(p1Flow)) p1Flow = 0;
currentStart = p1End + p1Flow;
// — Period 2 Calculation —
if (!isNaN(p2End)) {
var r2 = (p2End – currentStart) / currentStart;
periodReturns.push(r2);
breakdownHTML += 'Period 2: ' + (r2 * 100).toFixed(2) + '%
';
if (isNaN(p2Flow)) p2Flow = 0;
currentStart = p2End + p2Flow;
// — Period 3 Calculation —
if (!isNaN(p3End)) {
var r3 = (p3End – currentStart) / currentStart;
periodReturns.push(r3);
breakdownHTML += 'Period 3: ' + (r3 * 100).toFixed(2) + '%
';
if (isNaN(p3Flow)) p3Flow = 0;
currentStart = p3End + p3Flow;
}
}
// — Final Period Calculation —
// Calculate return from last 'currentStart' to 'finalValue'
if (!isNaN(finalValue)) {
var rFinal = (finalValue – currentStart) / currentStart;
var pNum = periodReturns.length + 1;
periodReturns.push(rFinal);
breakdownHTML += 'Period ' + pNum + ' (Final): ' + (rFinal * 100).toFixed(2) + '%
';
}
}
// TWRR Calculation: (1+r1)*(1+r2)*… – 1
var accumulator = 1;
for (var i = 0; i < periodReturns.length; i++) {
accumulator = accumulator * (1 + periodReturns[i]);
}
var twrr = accumulator – 1;
// Display
resultValue.innerText = (twrr * 100).toFixed(2) + "%";
breakdownBox.innerHTML = breakdownHTML;
resultBox.style.display = 'block';
}
Understanding the Time-Weighted Rate of Return (TWRR)
The Time-Weighted Rate of Return (TWRR) is the industry-standard method for measuring the performance of an investment portfolio. Unlike simple return calculations, TWRR eliminates the distorting effects of cash inflows (deposits) and outflows (withdrawals).
This makes it the preferred metric for comparing the performance of money managers, mutual funds, and ETFs, as these managers usually have no control over when investors choose to add or remove money.
TWRR vs. Money-Weighted Return
It is crucial to distinguish TWRR from the Money-Weighted Rate of Return (often calculated as IRR).
- TWRR (Time-Weighted): Measures the performance of the strategy itself. It ignores the timing of your cash flows. If you deposit $1M right before the market crashes, TWRR will only show the market's decline percentage, not the heavy dollar loss you specifically incurred due to bad timing.
- MWRR (Money-Weighted): Measures the performance of your specific account. It is heavily influenced by the timing of your deposits and withdrawals.
The Calculation Formula
To calculate TWRR, the investment period is broken down into sub-periods. A new sub-period begins every time a significant cash flow occurs. The return for each sub-period ($r_n$) is calculated separately.
Sub-Period Return (r) = (End Value – Start Value) / Start Value
Once the returns for all sub-periods are found, they are geometrically linked (compounded) to determine the total TWRR:
TWRR = [(1 + r1) × (1 + r2) × … × (1 + rn)] – 1
Example Calculation
Imagine you start with $100,000.
- Period 1: The portfolio grows to $110,000. You then deposit $10,000.
Return 1 = ($110,000 – $100,000) / $100,000 = 10% (0.10) - Period 2: The new start value is $120,000 ($110k + $10k). It drops to $115,000 by the end.
Return 2 = ($115,000 – $120,000) / $120,000 = -4.17% (-0.0417)
Total TWRR: [(1 + 0.10) × (1 – 0.0417)] – 1 = [1.10 × 0.9583] – 1 = 1.0541 – 1 = 5.41%
How to Use This Calculator
Use the fields above to break your investment timeline into segments.
- Initial Value: The balance at the very start.
- Period End Value: The balance of the portfolio immediately before a cash flow occurs.
- Net Cash Flow: The amount you added (+) or removed (-) after the valuation was taken.
- Final Value: The current balance of the portfolio.
If you have no cash flows, simply enter the Initial Value and the Final Value (leave the periods empty), and the calculator will provide a simple return rate.