Time-Weighted Return Calculator
Chain-link subperiod returns to measure portfolio performance without letting the size or timing of external contributions and withdrawals distort the result.
Time-weighted performance
| Period | Subperiod return | Growth factor | Cumulative TWR |
|---|
Time-weighted return formula
Time-weighted return (TWR or TWRR) links the return earned in each interval between external cash flows:
TWR = [(1 + r₁) × (1 + r₂) × … × (1 + rₙ)] − 1
For equally spaced periods, the annualized result is:
Annualized TWR = (1 + cumulative TWR)periods per year ÷ number of periods − 1
How cash flows are handled
Break the measurement horizon whenever money enters or leaves the portfolio. If a cash flow occurs at the beginning of a subperiod, the calculator uses:
r = ending value ÷ (beginning value + cash flow) − 1
If a cash flow occurs at the end of a subperiod, it uses:
r = (ending value − cash flow) ÷ beginning value − 1
This convention treats contributions and withdrawals as external movements, not investment gains or losses.
Verified example
| Period | Values and flow | Return |
|---|---|---|
| 1 | Begin 10,000; contribute 1,000 at end; end 11,500 | (11,500 − 1,000) ÷ 10,000 − 1 = 5% |
| 2 | Begin 11,500; withdraw 500 at beginning; end 11,660 | 11,660 ÷ (11,500 − 500) − 1 = 6% |
| 3 | Begin 11,660; no flow; end 12,592.80 | 12,592.80 ÷ 11,660 − 1 = 8% |
The cumulative TWR is 1.05 × 1.06 × 1.08 − 1 = 20.204%. With quarterly subperiods, the annualized TWR is approximately 27.8082%.
Time-weighted versus money-weighted return
Time-weighted return removes the effect of external cash-flow size and timing, so it is useful for evaluating an investment strategy or manager. Money-weighted return is an internal rate of return: it reflects when and how much the investor contributed or withdrew. They answer different questions and can differ substantially.
How to use the calculator
- Use direct-return mode if you already calculated each subperiod return.
- Use value-and-flow mode only when you have a valuation at every contribution or withdrawal.
- Record contributions as positive cash flows and withdrawals as negative cash flows.
- Select whether each cash flow occurred at the beginning or end of that subperiod.
- Choose the frequency that matches equally spaced subperiods before interpreting the annualized figure.
Limits and assumptions
- The calculator accepts 2–100 subperiods. Direct returns may range from −100% through 10,000%, with up to six decimal places.
- Portfolio values must be nonnegative; beginning values must be greater than zero. Monetary inputs are limited to 1015 and six decimals.
- Beginning values after the first row must match the previous ending value within one cent. Use the cash-flow field instead of changing the next beginning balance.
- Scientific notation and decimal commas are not supported. Commas separate direct returns.
- Annualization assumes equally spaced observations and a frequency that accurately describes them. It is not suitable for irregular dates.
- A −100% subperiod makes cumulative and annualized TWR −100%; later positive returns cannot restore a portfolio with zero remaining value.
- The tool does not download statements, adjust automatically for fees or taxes, value illiquid assets, or calculate money-weighted return.
- Results are historical educational estimates, not investment advice or a performance guarantee.
A trustworthy TWR requires valuations immediately around every external cash flow. If cash flows occurred between available valuations, the result is only an approximation even when the arithmetic is correct.
Frequently asked questions
Is time-weighted return the same as an average return?
No. TWR is a geometric chain-link of subperiod growth factors. A simple arithmetic average does not reproduce compounded performance.
Should dividends be entered as cash flows?
Not when they remain part of the portfolio or are included in total return. Dividends are investment performance, while the cash-flow field is for money added or removed by the investor.
Can TWR be negative?
Yes. A cumulative growth factor below 1 produces a negative TWR, even if some subperiods were positive.
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