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The investing glossary

Money-weighted return follows your money.

Money-weighted return (MWR) reflects both investment performance and when you add or withdraw money. The amount matters too.

Hypothetical example · no market prices

Move the money. Keep the return path.

1 Jan 2025 → 1 Jan 2026
365 days · USD

Positive adds money. Negative takes money out.

+$1,000 deposit

Use arrow keys for 100-dollar steps. Home chooses a 500-dollar withdrawal. End chooses a 5,000-dollar deposit.

Choose 2 January to 31 December 2025. The return path stays fixed.

Start with $1,000. The fictional investment gains 20% by 1 July, then loses 10% by the end. Every dollar follows that same path while invested.

Your money-weighted return
−1.33%Annual IRR using actual days
The fixed time-weighted return
+8.00%Same one-year period

Your invested portfolio

USD · axis starts at zero
Deposits
$2,000.00
Withdrawals
$0.00
Ending invested value
$1,980.00
Net gain / loss
−$20.00

More money is invested during the losing part of this path. The $20 loss and −1.33% MWR reflect that cash-flow experience.

Fig. 1Changing the cash flow changes your dollars and your MWR. It does not change this investment’s return path.

deposit $1,000 on 1 Jul 2025. Ending value $1,980.00. Net loss $20.00. Annual money-weighted return −1.33%. Time-weighted return stays plus 8 percent.

What stays fixed

100 grows to 120, then falls to 108.

The cash flow does not move this growth index. Its linked return is 1.20 × 0.90 − 1 = +8%.

The smooth segments are an assumption, not observed prices. Growth is spread at a constant compounded rate within each segment.

Investment growth index

Starts at 100 · fixed path
Fig. 2The marker moves when you change the date. The investment path and +8% TWR stay the same.

Why timing matters

Your money does not all work for the same time.

Initial investment

$1,000

1 Jan 20251 Jan 2026

Invested for 365 days.

Extra deposit

$1,000

1 Jan 20251 Jan 2026

From 1 Jul 2025, the extra money is invested for 184 days.

Fig. 3The highlighted part shows the time affected by the extra cash flow. A withdrawal removes money from the portfolio for the remaining time.

MWR finds one rate that fits the cash flows and ending value. It is not the dollar gain divided by all deposits. Nor is it an average of the two period returns.

Read the rate correctly

One result, with its method in view.

How is this MWR calculated?

We solve a dated internal rate of return, or IRR. Deposits are money paid by the investor, so they enter as negative cash flows. Withdrawals are positive. The ending value is treated as a final amount received for this calculation. No sale is actually performed.

Investor cash-flow signs · current selection
DateEntryUSD
1 Jan 2025Initial investment−1,000.00
1 Jul 2025Deposit−1,000.00
1 Jan 2026Ending portfolio value+1,980.00

−1000 − 1000 / (1 + r)^(181/365) + 1980.000000 / (1 + r) = 0

This equation uses actual day gaps and a 365-day year, as in Excel’s XIRR date convention. The value of r is an annual rate. Here the full measurement period is exactly 365 days. The dated equation is solved locally by a bounded numerical search, not by running Excel.

Why can an IBKR report show a different MWR?

IRR is one money-weighted method. IBKR’s PortfolioAnalyst whitepaper describes Modified Dietz, which weights cash flows differently. Dates, valuations, fees and the report’s cash-flow treatment matter. This lesson does not reproduce or reconcile an IBKR report.

Our TWR / MWR guide covers report interpretation and choosing a comparison. This page stays with the short definition and one adjustable example.

Can IRR or XIRR fail?

Yes. More complex cash-flow patterns can have no valid result or more than one. A numerical solver may also fail to find one. This lesson allows only one extra cash flow, keeps the portfolio positive and has one valid rate in its permitted range.

Do not combine MWRs from separate periods or compare an annual rate with a cumulative return for a different period. A rate alone does not describe risk or prove investment skill.

Assumptions and primary sources

Hypothetical USD values and returns. No securities, market history or forecast are represented. The first segment lasts 181 days and the second 184 days. The cash flow happens at the selected instant, after growth to that instant and before later growth. Deposits invest immediately in the same path. A withdrawal leaves the measured portfolio and is not reinvested inside it. No fees, taxes, dividends, FX or other transactions.

This is a bounded glossary lesson, not a general portfolio calculator, audit result, investment recommendation or claim of GIPS compliance. The definition, default result and figures are available before any interaction. The controls only change this example. Sources checked 20 October 2026.