Time-weighted rate of return (TWR)

The time-weighted rate of return (TWR) is a measure of return that assesses an investment’s performance by disregarding – or excluding from the calculation – the investor’s cash inflows and outflows. This allows for a fair comparison of investment strategies or funds with varying cash flows over a specific period.

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

True Wealth enables its clients to present portfolio returns as both time-weighted and money-weighted returns. The individual multi-asset benchmark also provides a tool for comparing the return on one’s own portfolio – often diversified across multiple asset classes – against a theoretical benchmark.

In the following blog post, we explore this topic in more detail using concrete examples: Calculating Portfolio Returns.