How to use the time-weighted return calculator
- Enter the start date and start value of the account, and the end date and end value.
- Add a row for each deposit or withdrawal. Enter its date, the account value just before it, and the amount (positive for a deposit, negative for a withdrawal).
- Read the time-weighted return and its annualized figure, then check the sub-period table to see the return between each pair of flows.
- Compare with the dollar gain, which is the change in value less the net deposits.
Formula
Sub-period return = value just before the next flow / value at the start of the sub-period - 1
Value at the start of the next sub-period = value just before the flow + the flow
Time-weighted return = (1 + r1) x (1 + r2) x ... - 1
Annualized = (1 + return)^(365 / days) - 1
Multiplying the sub-period returns removes the effect of how much money was in the account at each moment, which is the point of the method.
An account with a deposit and a withdrawal
An account starts 2025-01-01 at $10,000. On 2025-04-01 it is worth $10,500 just before a $5,000 deposit. On 2025-09-01 it is worth $14,800 just before a $2,000 withdrawal. On 2025-12-31 it is worth $13,500.
The three sub-periods return 10,500 / 10,000 - 1 = 5.0000%, then 14,800 / 15,500 - 1 = -4.5161%, then 13,500 / 12,800 - 1 = 5.4688%. Chaining them gives 1.05 x 0.954839 x 1.054688 - 1 = 5.7409%. Over 364 days that is 5.7571% annualized. The dollar gain is 13,500 - 10,000 - 3,000 net deposits = $500.
Why not just divide the gain by the starting amount
If you add money late in a good year, a simple gain divided by the starting amount looks too good, and if you add money before a bad stretch it looks too bad. Neither says how well the investments did. The time-weighted method asks a different question: what did one dollar earn while it was invested, no matter when you added or removed money?
This is the usual way fund returns are reported, because the manager does not control when clients add money. The money-weighted view, which does reward good timing by the investor, is what the XIRR Calculator measures. Seeing both together shows how much your own timing helped or hurt.
Getting the values right
Each deposit or withdrawal needs the account value just before it, so use a statement or a valuation on that day. Include dividends and interest that stay in the account in the value. If a flow happens on the start or end date, put it on the row and keep the value before it.
Compare your result with a benchmark using the Investment Return Comparison Calculator, and use the Real Rate of Return Calculator to take inflation out of the answer.
Assumptions and limits
- Each flow happens at the moment the value before it is measured, and the new balance is that value plus the flow.
- The account value after a withdrawal must stay above zero, or the next sub-period has no base to measure from.
- Annualizing uses a 365 day year and assumes the same rate would continue, which the real future may not.
- Fees and taxes are included only if they are already in the account values you enter.
Frequently asked questions
What is a time-weighted return?
It is the growth of one dollar left invested for the whole period, found by chaining the returns between each deposit or withdrawal. It ignores how much money was in the account at each time, so it measures the investments rather than your timing.
Why does it differ from the dollar gain divided by my deposits?
That simple figure mixes the performance of the investments with when and how much you added. The time-weighted result separates them, so a large deposit just before a drop does not change the measured performance.
Do I need a row for every dividend?
Only when the dividend leaves the account or you add new money. A dividend that stays in the account is already in the value, so it needs no row.
Can the annualized figure be misleading?
Yes, especially for periods shorter than a year. Annualizing a few weeks of returns turns luck into a large yearly number, so treat that line with caution when the period is short.