How to use the modified dietz return calculator
- Enter the start date, the value on the start date, the end date and the value on the end date.
- Add each deposit as a positive amount and each withdrawal as a negative amount, with its date.
- Read the Modified Dietz return for the whole period, and the annualized figure.
- Open the weights table to see how much of the period each cash flow was invested.
Formula
gain = end value - start value - net cash flows
weight of a flow = (end date - flow date) / days in the period
return = gain / (start value + sum of flow x weight)
The denominator is the average capital invested over the period. The annualized figure is (1 + return)^(365 / days) - 1.
A year with a deposit and a withdrawal
A portfolio starts 2026 at $50,000 and ends the year at $63,000. It receives a $5,000 deposit on April 1 and pays out $2,000 on September 1. Net cash flows are $3,000, so the gain is $63,000 - $50,000 - $3,000 = $10,000.00.
The deposit was invested for 75.27% of the 364 day period, so it counts as $3,763.74. The withdrawal weighs 33.24%, so it counts as ($664.84). The average capital invested is $50,000 + $3,763.74 - $664.84 = $53,098.90, and the return is $10,000 / $53,098.90 = 18.83%. Compounded to 365 days, that is 18.89%. Dividing the end value by the start value gives 26%, which wrongly counts the new deposit as profit.
What Modified Dietz measures
A simple change in value mixes returns with deposits. Modified Dietz removes the deposits and withdrawals from the gain and divides by the money that was actually at work, giving each flow a weight for how long it was invested. It is a money-weighted measure, so it reflects the effect of when you added or removed money.
It is an approximation of the exact money-weighted return, because it assumes each flow earns a constant rate over the period. It is close when flows are small compared with the portfolio or the market is calm, and less so with large flows during sharp moves.
Other ways to measure a return
If you want to judge the investments themselves, apart from your timing, use the Time-Weighted Return Calculator, which links the returns between flows. For an exact money-weighted rate from dated cash flows, use the XIRR Calculator. The Investment Return Comparison Calculator compares two plans, and the ROI Calculator gives a simple gain on cost.
Assumptions and limits
- Cash flows happen at the dates you give, and each flow is invested until the end date.
- The start value is the value on the start date before any flow that day. A flow on the start date counts for the whole period.
- The average capital invested must be above zero. Fees, taxes and income paid out are not modeled separately.
- The result is information, not a forecast. Annualized returns over short periods can be misleading.
Frequently asked questions
What is the difference between Modified Dietz and time-weighted return?
Time-weighted return removes the effect of the size and timing of cash flows, so it judges investment skill. Modified Dietz includes that effect, so it reflects what you earned on the money you actually had invested.
Should deposits be positive?
Yes. Enter money added to the portfolio as positive and money taken out as negative. The sign decides whether the flow raises or lowers the average capital invested.
Why is the annualized figure different from the period return?
The period here is 364 days, so compounding to 365 days changes it slightly. For a six month period, annualizing roughly doubles the rate and can exaggerate a short result.
What if the end value is lower than the start value?
The return is then negative. The page shows it with a minus sign, and the annualized figure follows the same math, as long as the average capital invested is positive.