MWR vs TWRmoney-weighted vs time-weighted return
Definition
MWR 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.
The money-weighted return (MWR) and the time-weighted return (TWR) are two correct but different answers to “how much did I make?”. The difference comes only from deposits and withdrawals: without cash flows, both measures give the same result.
Which one to use
- Did I make or lose money? The total gain in your currency.
- How fast did my invested money grow? MWR.
- How did the portfolio perform regardless of when I deposited? TWR.
- Am I beating the S&P 500? TWR, in the same currency and over the same period.
An example where they diverge
You invest 1,000, which grows 50% to 1,500 over half a year. You add 100,000 and the market falls 10%, so the portfolio ends the year at 91,350. TWR is +35% (1.50 × 0.90 − 1), because the investments did very well in the first half. MWR is about −18%, because most of the money went through the drop. The money loss is 9,650.
It works the other way too. If you deposit a large amount just before a rally, MWR will be higher than TWR: you picked a good moment, even though the portfolio itself was nothing special.
Common mistakes
- Comparing the portfolio’s MWR with an index: the index has none of your deposits, so compare it with TWR.
- Calculating return as gain ÷ total deposits when you add money regularly: it understates the result by treating every deposit as invested from day one.
- Reading an annualized rate for a period shorter than a year without checking its length.
MWR and TWR in FundStat
The dashboard return card switches between MWR and TWR, and the docs explain both measures on the same examples.
Related terms
All terms- MWRMWR 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.
- 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.
- Portfolio benchmarkA portfolio benchmark is a reference point, usually an index such as the S&P 500 or WIG20TR, that you compare your investment results with to see if you are beating it.
- 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.