What Is Money-Weighted Return?
Money-Weighted Return (MWR), also known as the Internal Rate of Return (IRR), measures the actual return earned on your invested capital by accounting for the timing and size of all cash flows — deposits, withdrawals, dividends, and contributions. Unlike time-weighted return, MWR reflects the impact of your investment decisions about when to add or remove money from your portfolio.
MWR is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. It gives more weight to periods when more money is invested, making it the most accurate measure of your personal investment performance.
How to Use This Calculator
- 1
Enter Your Initial Investment
Set the date and value of your portfolio at the start of the measurement period. This is the beginning balance of your investment account.
- 2
Add Cash Movements
Enter each deposit (positive value) or withdrawal (negative value) with its exact date. Include all contributions, withdrawals, dividend reinvestments, and transfers.
- 3
Enter Your Final Value
Set the end date and current portfolio value. This is the ending balance of your investment account on the measurement date.
- 4
Calculate Your Return
Click Calculate to see your money-weighted return for the period and the annualized rate. The result accounts for the exact timing and magnitude of every cash flow.
Money-Weighted Return Formula
The MWR is found by solving for the rate r in the following equation, where the net present value of all cash flows equals zero:
PV₀ + CF₁/(1+r)^t₁ + CF₂/(1+r)^t₂ + ... + FV/(1+r)^T = 0
Where PV₀ = initial value, CF = cash flows, FV = final value, t = time in years, r = MWR
This equation is solved iteratively using the Newton-Raphson method. The resulting rate r is the annualized money-weighted return. The total period return is calculated as (1+r)^T − 1, where T is the total period in years.
Money-Weighted Return vs. Time-Weighted Return
Money-Weighted Return (MWR)
- • Accounts for timing and size of cash flows
- • Measures your personal investment performance
- • Affected by when you add or withdraw money
- • Best for evaluating individual investor results
- • Also known as Internal Rate of Return (IRR)
Time-Weighted Return (TWR)
- • Eliminates the impact of cash flow timing
- • Measures the fund or strategy performance
- • Not affected by deposits or withdrawals
- • Best for comparing fund managers
- • Industry standard for mutual fund reporting
When Should You Use Money-Weighted Return?
Personal Portfolios
When you control the timing of deposits and withdrawals, MWR accurately reflects your actual investment experience.
Retirement Accounts
Track the true performance of your 401(k) or IRA with regular contributions and occasional withdrawals.
Private Equity & Real Estate
MWR (IRR) is the standard performance metric for private investments with irregular cash flows.