Time-weighted return (TWR)

Time-weighted return measures investment performance while removing the effect of money added or withdrawn. It links the returns between external cash flows, instead of treating a deposit as a gain.

Change the deposit. Keep the returns.

One year, split into two six-month periods.

Fictional example · fixed returns

Deposit at month 6

Added after the first return, before the second. All of it is invested immediately.

$1,000 USD

Use the arrow keys to change the deposit by 100 dollars. Home sets zero and End sets 5,000 dollars.

Starting value: $1,000
Months 0–6: +20%
Months 6–12: −10%

Your portfolio value

USD · axis starts at zero

Fig. 1The dashed jump is your deposit. Only the solid segments represent investment returns.

Total money contributed: $2,000
Ending portfolio value: $1,980
Profit / loss in dollars: −$20
One-year TWR: +8%

In this fixed-return example, the deposit changes your dollars, not your TWR. The two period returns stay +20% and −10%, whatever deposit you choose.

See the two period returns

First six months$1,200 ÷ $1,000 − 1 = +20%

Next six months$1,980 ÷ $2,200 − 1 = −10%

Deposit $1,000. Total contributed $2,000. Ending value $1,980. Loss $20. One-year TWR stays plus 8 percent.

What TWR keeps

Follow the growth, without the deposit.

Start an index at 100. Apply each period’s return. The deposit does not add points to this index.

Growth index · starting at 100

Fig. 2100 becomes 108. The linked return is +8%, even when the dollar result changes.

The calculation

Multiply. Then subtract 1.

(1 + 20%) × (1 − 10%) − 1 = +8%

Split the period at the external cash flow. Calculate each return using the value before or after the deposit, as appropriate. Then link the growth factors.

A deposit comes from outside the portfolio being measured. Buying a stock with cash already in that portfolio is not an external deposit.

A little more context

What this number tells you.

Can TWR be positive while I lose money?

Yes. With the default $1,000 deposit, more money is invested during the losing period. You contribute $2,000 and finish with $1,980. The linked return is still +8% because TWR removes the effect of the deposit.

Is this my personal return?

It is one way to describe investment performance. Money-weighted return answers a different question by including the size and timing of your cash flows. Neither return alone measures risk.

Is +8% an annualized return?

This example covers exactly one year, so its cumulative and annualized returns are both +8%. For another period length, annualizing is a separate calculation.

Example and source

Fictional USD values, two six-month periods and one external deposit, invested immediately at month 6. No fees, taxes, dividends, withdrawals or currency changes are included. Lines join period endpoints and do not show actual market prices. This is a glossary demonstration, not an audit result, general calculator or forecast.

Method principle: CFA Institute, Introduction to the GIPS Standards for Asset Owners, slides 23–25, describes TWR and external cash flows. Source checked 20 October 2026. This example does not claim GIPS compliance.