What Is Time-Weighted Return (TWR)?
Time-Weighted Return (TWR) is a method of calculating investment performance that eliminates the distorting effects of cash inflows and outflows. It measures the compound rate of growth of one dollar invested over a given period, making it the industry-standard metric for evaluating portfolio managers and comparing fund performance. The CFA Institute and GIPS (Global Investment Performance Standards) require TWR for performance reporting.
Unlike simple return or money-weighted return (IRR), TWR isolates the investment manager's skill from the investor's timing of deposits and withdrawals. This makes it the fairest way to compare performance across different portfolios, regardless of when or how much money was added or removed.
How to Use This Time-Weighted Return Calculator
- 1
Enter Your Initial Value
Input the starting date and the market value of your portfolio at the beginning of the measurement period.
- 2
Add Cash Movements
For each deposit or withdrawal, enter the date, the cash flow amount (positive for deposits, negative for withdrawals), and the portfolio value immediately after the cash flow occurred.
- 3
Enter Your Final Value
Input the ending date and the current market value of your portfolio. This is the value at the end of the measurement period.
- 4
Calculate and Analyze
Click Calculate to see your TWR, annualized return, and a detailed breakdown of each sub-period's holding period return (HPR).
Time-Weighted Return Formula
The TWR calculation breaks the total investment period into sub-periods at each cash flow event. For each sub-period, a Holding Period Return (HPR) is calculated. The TWR is then the geometric linking of all sub-period returns:
TWR = [(1 + HPR₁) × (1 + HPR₂) × ... × (1 + HPRₙ)] - 1
Where HPR = (End Value - Start Value) / Start Value for each sub-period
To annualize the TWR, the formula adjusts for the total time period:
Annualized TWR = (1 + TWR)^(365.25 / Total Days) - 1
TWR vs. Money-Weighted Return (MWR)
Time-Weighted Return (TWR)
Measures the compound growth rate independent of cash flows. Best for evaluating investment manager performance and comparing funds. Used by GIPS standards and the CFA Institute for performance reporting.
Money-Weighted Return (MWR/IRR)
Accounts for the timing and size of cash flows. Best for measuring the actual return experienced by the investor. Reflects the impact of deposit and withdrawal timing decisions on overall performance.
When to Use Time-Weighted Return
Fund Comparison
Compare mutual funds, ETFs, or hedge funds on a level playing field regardless of investor cash flow patterns.
Manager Evaluation
Evaluate your financial advisor or portfolio manager's skill without the bias of your deposit and withdrawal timing.
GIPS Compliance
Meet Global Investment Performance Standards requirements for institutional performance reporting and client presentations.