Portfolio Return Calculator

Measuring Your Investment Performance

Portfolio return goes beyond tracking account balances—it requires accounting for deposits, withdrawals, and timing to reveal true performance. The calculator computes time-weighted and money-weighted returns, enabling accurate comparison of your results to benchmarks and other investors.

Raw account growth can mislead: a portfolio that doubled might have underperformed if most deposits came after gains. Understanding return calculation methods reveals whether your investment strategy is working.

True performance, not just growth.

Why Simple Return Misleads

Simple calculation (ending - beginning) ignores deposits:

January 1: $100,000 Added in June: $50,000 December 31: $165,000

Simple: ($165,000 - $100,000) / $100,000 = 65% ← Wrong!

Actual return much lower—need to account for $50,000 addition.

Time-Weighted Return (TWR)

TWR eliminates impact of cash flows—measures pure investment return:

Calculates return for each period between cash flows Geometrically links period returns Standard for comparing investment managers

TWR answers: "How well did the investments perform?"

TWR Calculation Example

Period 1 (Jan-Jun): Starting: $100,000 Ending before deposit: $105,000 Return: 5%

Period 2 (Jun-Dec): Starting after deposit: $155,000 Ending: $165,000 Return: 6.45%

TWR = (1.05 × 1.0645) - 1 = 11.77%

Money-Weighted Return (MWR)

MWR (IRR) accounts for timing of cash flows:

Weights returns by how much money was invested when Reflects actual investor experience Penalizes bad timing, rewards good timing

MWR answers: "What did the investor actually earn?"

MWR vs. TWR Example

Scenario A (good timing): Deposited $100,000, market rose 10%, added $100,000, market rose 10% TWR: 21% MWR: 21% (same timing)

Scenario B (bad timing): Deposited $100,000, market rose 10%, added $100,000, market fell 5% TWR: 4.5% MWR: ~0% (more money during decline)

When to Use Each

Use TWR for:

• Evaluating investment managers
• Comparing to benchmarks
• Assessing strategy independent of timing

Use MWR for:

• Your actual investment experience
• Evaluating your personal decisions
• Understanding what you earned

Annualized Return Calculation

Convert multi-year returns to annual:

Total return over 3 years: 45% Annualized: (1.45)^(1/3) - 1 = 13.2%

More useful than stating "45% over 3 years."

Period Return Linking

Link sub-period returns geometrically:

Q1: 3% Q2: -2% Q3: 5% Q4: 4%

Annual: (1.03 × 0.98 × 1.05 × 1.04) - 1 = 10.2%

Not 3% + (-2%) + 5% + 4% = 10% (arithmetic is wrong).

Benchmark Comparison

Portfolio performance vs. benchmark:

Portfolio TWR: 12.5% S&P 500: 14.2% Underperformance: -1.7%

Your 60/40 portfolio vs. 60/40 benchmark: Portfolio: 9.8% Benchmark: 10.1% Underperformance: -0.3%

Compare to appropriate benchmark.

Risk-Adjusted Returns

Return alone doesn't tell whole story:

Portfolio A: 15% return, 20% volatility Portfolio B: 12% return, 10% volatility

Sharpe ratio A: (15% - 3%) / 20% = 0.60 Sharpe ratio B: (12% - 3%) / 10% = 0.90

B had better risk-adjusted performance.

After-Tax Returns

Pre-tax vs. after-tax:

Pre-tax return: 10% Tax rate: 24% Tax drag: ~2% After-tax return: ~8%

Tax-deferred accounts preserve full return longer.

Fee Impact on Returns

Gross vs. net returns:

Gross return: 9% Expense ratio: 1% Net return: 8%

Over 30 years at $100,000: Gross (9%): $1,327,000 Net (8%): $1,006,000 Fee impact: $321,000

Dollar-Weighted Average

Understanding your average cost:

Buy 100 shares at $50: $5,000 Buy 200 shares at $40: $8,000 Total: 300 shares for $13,000 Average cost: $43.33

Current price $45: Total return: ($45 - $43.33) / $43.33 = 3.8%

Multi-Asset Portfolio Return

Weighting component returns:

Stocks (60%): 12% return Bonds (30%): 4% return Cash (10%): 2% return

Portfolio return: 0.6(12%) + 0.3(4%) + 0.1(2%) = 8.6%

Attribution Analysis

Understanding return sources:

Total return: 12% Allocation effect: 2% (being in right asset classes) Selection effect: 1.5% (picking good securities) Interaction: 0.5% Benchmark: 8%

Decomposes outperformance sources.

Cumulative Return Chart

Visualizing growth:

Year 1: $100K → $108K (8%) Year 2: $108K → $119K (10%) Year 3: $119K → $113K (-5%) Year 4: $113K → $129K (14%) Year 5: $129K → $142K (10%)

Cumulative: 42% Annualized: 7.3%

Using the Calculator

Enter beginning value, ending value, and any cash flows with dates.

The calculator shows:

• Time-weighted return (TWR)
• Money-weighted return (MWR/IRR)
• Annualized returns
• Cumulative return
• Comparison to benchmark (if provided)

Model scenarios: What's my true return after accounting for deposits? How does my timing affect results? How do I compare to the market?

Use results to accurately assess your investment performance and make informed portfolio decisions.

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Portfolio return calculation requires more than comparing beginning and ending balances—deposits and withdrawals must be properly handled. The calculator computes both time-weighted and money-weighted returns, revealing pure investment performance and your actual experience. Accurate return measurement enables honest assessment of whether your strategy is working.