MWRMoney-Weighted Return
Definition
MWR is a money-weighted rate of return: it accounts for the amount and date of every deposit and withdrawal, showing how fast the investor’s money grew.
The money-weighted return (MWR) answers one question: given how much I invested and when, what constant annual rate of return explains where I am today? It is the same measure spreadsheets calculate with the XIRR function, and in finance it is called the internal rate of return (IRR).
Larger amounts and longer periods carry more weight in MWR. That is why it reflects the investor’s own experience: a great result on a small amount matters less than a weak result on a large one.
Example: uneven deposits
- On January 1 you deposit 10,000.
- On September 1 you deposit another 90,000.
- On October 31 the portfolio is worth 110,000.
The simple return is 10% (10,000 gain ÷ 100,000 deposited), because it treats the whole amount as if it had been invested since January. MWR knows that 90% of the money arrived in September, so it comes to about 48.9% annualized and about 39% for the whole period.
Period MWR and annualized MWR
Over short periods the annualized MWR can look extreme: 10% earned in a month is more than 200% a year once annualized. Always read it together with the length of the period. MWR describes the past and is not a forecast.
MWR is not suited to comparing a portfolio with an index, because it depends on the timing of your deposits. The time-weighted return (TWR) is built for that.
MWR in FundStat
Pick MWR on the Investor return card: the large number is the result for the selected period, the small one below it is the annualized rate.
Related terms
All terms- TWRTWR is a time-weighted rate of return: it measures the investments alone, without the effect of deposits and withdrawals. It is the standard for benchmarking.
- MWR vs TWRMWR measures the investor’s result including the timing of deposits; TWR measures the portfolio alone. One portfolio can have a positive TWR and negative MWR.
- XIRR and IRRIRR is the internal rate of return: the rate at which the present value of all cash flows equals zero. XIRR computes it for flows on any dates, e.g. in Excel.
- Portfolio returnPortfolio return is the percentage result of your investments over a period. It can be simple, money-weighted (MWR) or time-weighted (TWR), cumulative or annual.