Weighted Average Rate of Return Calculator

Weighted Average Rate of Return Calculator

Enter the current value and the individual rate of return for up to five different assets in your portfolio to calculate the overall weighted average return.

Asset 1:

Asset 2:

Asset 3:

Asset 4:

Asset 5:

function calculateWARR() { var totalPortfolioValue = 0; var totalWeightedReturn = 0; var hasValidInput = false; // Loop through all 5 asset slots for (var i = 1; i 0 && !isNaN(rate)) { totalPortfolioValue += val; // Calculate dollar return for this asset: Value * (Rate / 100) totalWeightedReturn += val * (rate / 100); hasValidInput = true; } } var resultElement = document.getElementById('warrResult'); if (!hasValidInput || totalPortfolioValue === 0) { resultElement.innerHTML = "Please enter at least one valid asset value and rate."; resultElement.style.color = "#d63638"; } else { // Final calculation: (Total Dollar Return / Total Portfolio Value) * 100 var warr = (totalWeightedReturn / totalPortfolioValue) * 100; resultElement.innerHTML = "Portfolio Weighted Average Return: " + warr.toFixed(2) + "%"; resultElement.style.color = "#0073aa"; } }

Understanding Weighted Average Rate of Return

The Weighted Average Rate of Return (WARR) is an essential financial metric used to determine the aggregate performance of a portfolio containing multiple distinct investments. Unlike a simple average, which treats all investment returns equally regardless of size, the weighted average accounts for the proportionate value of each asset relative to the total portfolio size.

Why Weighting Matters

Calculating the return of a diversified portfolio requires more than just adding up individual interest rates and dividing by the number of assets. The amount of capital allocated to each specific investment heavily influences the true overall return.

For example, consider a two-asset portfolio:

• Asset A: $90,000 invested at a 2% return.
• Asset B: $10,000 invested at a 20% return.

A simple average of the rates would suggest an (2% + 20%) / 2 = 11% return. However, this is misleading because 90% of the portfolio is only earning 2%. The weighted average calculation corrects this by giving more "weight" to the larger investment, revealing that the true portfolio return is actually much lower (specifically, 3.8%).

How the Calculation Works

To calculate the WARR, you must first determine the weight of each asset (its value divided by the total portfolio value). Then, multiply each asset's weight by its individual rate of return. Finally, sum these weighted returns together.

Alternatively, as this calculator does, you can calculate the total projected dollar return for all assets, sum them, and divide that total by the total value of the portfolio.