Time-weighted rate of return (TWR)

The time-weighted rate of return (TWR) is a measure of return that tracks how well an investment is doing by ignoring the investor's deposits and withdrawals, or taking them out of the calculation. This makes it possible to fairly compare investment strategies or funds with different cash flows over a certain period of time.

TWR is the counterpart to the money-weighted rate of return (MWR). While TWR measures pure strategy performance, MWR focuses on the investor's actual results, including the impact of their own investment decisions (e.g., the timing of purchases and sales).

True Wealth allows clients to display portfolio returns as both time-weighted and money-weighted returns.

In the following blog, we take a closer look at this topic using specific examples: Performance Calculation