Historical Yield Calculator (TWR vs. MWR)

Discover the real return rate of your portfolio. Understand the difference between the portfolio return managed by the market (TWR - Time-Weighted Return) and the effective return of your investment (MWR - Money-Weighted Return) influenced by the dates of your contributions and withdrawals.

Case Studies:
Positive Timing (Contribution at Low) Negative Timing (Contribution at Top) Neutral Movements
Fill in the semiannual balances and movements and click on Calculate Returns to run the rate decomposition.
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Annualized Portfolio Return (TWR)
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Annualized Investor Return (MWR)
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Investor Timing Effect
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Profit / Net Gain (USD)
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Net Movement
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Accumulated TWR Return (2 Years)

Comparative of Annualized TWR vs. MWR Rates

Evolution of Nominal Wealth vs. Total Contributed

Semiannual Detail of Balances and Time Returns

Period Initial Balance Return in Period Gross Final Balance Semiannual Movement Adjusted New Balance

Understanding the Difference: TWR vs. MWR

Many investors look at their brokerage statements and notice that the accumulated percentage return disclosed does not match their actual financial profit. This occurs due to the two distinct ways of calculating the historical yield of a portfolio: TWR (Time-Weighted Return) and MWR (Money-Weighted Return).

1. Time-Weighted Return (TWR) — Return Rate Weighted by Time

TWR calculates the return by eliminating the effects of contributions and withdrawals made by the investor. It breaks down the history into sub-periods (delimited by the dates of contributions or withdrawals), calculates the isolated percentage return of each sub-period, and multiplies these rates.

It is the standard metric used by the investment fund industry because it evaluates only the performance of management/assets under market conditions, without penalizing or benefiting the manager for individual decisions of shareholders to contribute more or withdraw resources.

2. Money-Weighted Return (MWR) — Return Rate Weighted by Money

MWR is equivalent to the Internal Rate of Return (TIR/IRR) of the portfolio. It takes into account both the return on assets and the volume and exact timing of when the investor put in or took out money.

If you contribute a large amount of capital immediately before a market high, your MWR will be significantly higher than your TWR. If you contribute before a market low, or withdraw at the historical low of the decline, your MWR will be much lower than your TWR. Therefore, MWR accurately reflects the return rate of the investor's pocket.

Frequently Asked Questions

This happens due to the so-called bad market timing. Suppose you started with $1,000, the portfolio rose 50% (became $1,500), and then you contributed $10,000 (totaling $11,500). Soon after, the assets fell 20%. In terms of TWR, your return is $+20%$ (since $(1+0.50) \times (1-0.20) = 1.20$). However, financially, you lost 20% of $11,500 ($2,300 loss), which cancels out your initial gain of $500, leaving you with a nominal loss of $1,800. Your MWR will be negative.

To evaluate the competence of the manager or the quality of the assets, you should look exclusively at the TWR. It allows for a fair comparison of the portfolio against market benchmarks (such as the interbank rate or the Ibovespa), since the manager has no control over when you decide to make withdrawals or new contributions to the account.

To optimize your MWR, you should avoid trying to "guess the top and bottom of the market" (market timing), which often generates incorrect movements (purchases in euphoria and sales in panic). The strategy recommended by personal finance experts is Dollar-Cost Averaging (DCA), or constant and recurring monthly contributions, which dilutes the timing risk and approximates your MWR to the TWR of long-term assets.