# Time-weighted return

Also written time-weighted, time-weighted rate of return, TTWROR, money-weighted return, dollar-weighted return.

*https://stockmarketstack.com/glossary/time-weighted-return · next to Stock Portfolio Trackers*

**Definition:** A return that measures the holdings rather than the timing of your deposits. The period is cut at every external cash flow, a return is computed for each sub-period, and those are multiplied together, so money arriving or leaving has no effect on the figure. A money-weighted return is the opposite: those same flows are part of what it measures.

## How it works

Both figures answer a question about one account over one period. They differ in what they treat as
noise.

The performance standards this industry is measured against define them in one line each. The GIPS
standards call a time-weighted return a method of calculating period-by-period returns that reflects
the change in value and negates the effects of external cash flows, and a money-weighted return the
return for a period that reflects the change in value and the timing and size of external cash flows.
An external cash flow is capital, cash or investments, entering or leaving the portfolio — and
dividend and interest income payments are specifically excluded from that definition.

**The time-weighted mechanism is sub-period returns, linked.** Value the portfolio, compute the
return over the stretch until the next cash flow, value it again at the flow, and continue; then
multiply the sub-period returns together. The GIPS requirements are explicit about both halves: for
portfolios in a composite, valuation must happen at least monthly, on the last business day of the
month, and on the date of all large cash flows, with the firm defining what large means for each
composite; and returns must be calculated at least monthly, with sub-period returns calculated at the
time of all large cash flows where daily returns are not, and the periodic and sub-period returns
geometrically linked. Where a valuation at the flow is unavailable, approximations such as the
Modified Dietz method weight each flow by the fraction of the period it was present instead of
revaluing — the same intent, one arithmetic step cruder.

**The money-weighted mechanism is a discount rate.** One rate that, applied to every dated cash flow
and the closing value, reconciles them. That is an internal rate of return; computed from actual
dates rather than even periods it is what a spreadsheet calls XIRR, and it is the same quantity
whether a product labels it IRR, XIRR, money-weighted or dollar-weighted. GIPS requires such returns
to be annualised since inception and calculated using daily external cash flows.

The consequence of the two definitions is the whole of the term: on an account you have been adding
to, the two numbers are different, and neither is a mistake. A deposit made just before a fall drags
the money-weighted figure down and leaves the time-weighted one untouched, because the first is
measuring your money and the second is measuring the holdings.

## The standard picks one, and says when

Worth knowing because it explains which figure professional reporting defaults to. Under the 2020
GIPS standards a firm must present time-weighted returns, and may present money-weighted returns only
where it controls the external cash flows into the portfolios and the composite or fund is closed-end,
fixed life, fixed commitment, or has illiquid investments as a significant part of the strategy.
Switching between the two is not silent either: a firm changing from one type to the other must
disclose the change.

That is the reverse of a private investor's situation, which is the point. You control your own cash
flows entirely, so the figure that describes your account is the one the standard treats as the
exception.

## Why it matters here

This is the single most common reason a tracker and a broker show different returns for the same
account on the same day, and the products in
[portfolio trackers](https://stockmarketstack.com/categories/portfolio-trackers) genuinely differ on which they compute.
[Sharesight](https://stockmarketstack.com/tools/sharesight) reports money-weighted only — its own term is dollar-weighted,
computed with a variation of the Modified Dietz method rather than IRR, on the documented reasoning
that time-weighted return is for judging fund managers rather than investors — so its headline
percentage is not comparable with a fund's published figure at all. [Portseido](https://stockmarketstack.com/tools/portseido)
and [Wealthfolio](https://stockmarketstack.com/tools/wealthfolio) report both. [Snowball Analytics](https://stockmarketstack.com/tools/snowball-analytics)
shows IRR and TWR side by side, and [getquin](https://stockmarketstack.com/tools/getquin) puts TTWROR charts and IRR behind its
paid tier, TTWROR being the same time-weighted idea computed off a valuation at each cash flow.

What almost nothing does is label the headline number on the dashboard. So the question to take to a
help page is not which method is better but which one this figure is, and — for a time-weighted
figure — whether the portfolio is revalued at each cash flow or approximated by weighting the flows.
Two products applying the two mechanisms above to identical transactions will disagree by more than a
rounding error on any account that has been funded over time, and until you know which is which there
is nothing to reconcile.

## Where you will meet this

- [Sharesight](https://stockmarketstack.com/tools/sharesight.md)
- [Portseido](https://stockmarketstack.com/tools/portseido.md)
- [Snowball Analytics](https://stockmarketstack.com/tools/snowball-analytics.md)
- [getquin](https://stockmarketstack.com/tools/getquin.md)
- [Wealthfolio](https://stockmarketstack.com/tools/wealthfolio.md)
- [CSI Data](https://stockmarketstack.com/tools/csi-data.md)
- [justETF](https://stockmarketstack.com/tools/justetf.md)
- [Stock Rover](https://stockmarketstack.com/tools/stock-rover.md)

## FAQ

### Which of the two numbers is the one I actually earned?

The money-weighted one. It is computed from your dated cash flows and the closing value, so it answers what your money returned given when you put it in. The time-weighted figure deliberately strips that out, which is what makes it comparable with a fund's published return and what makes it a poor description of your own account.

### Does a reinvested dividend count as a cash flow?

Not an external one. Under the GIPS definition an external cash flow is capital entering or leaving the portfolio, and dividend and interest income payments are explicitly not external cash flows. So a dividend does not cut the period for a time-weighted calculation, while a deposit of the same size does — which is one reason two tools disagree on portfolios paying a lot of income.

## Sources

1. [Global Investment Performance Standards (GIPS) for Firms, 2020 edition](https://www.gipsstandards.org/wp-content/uploads/2021/03/2020_gips_standards_firms.pdf) — CFA Institute, 2020-01-01. The current edition — it took effect on 1 January 2020 and CFA Institute has published no successor edition.

*Last updated 2026-09-21. A reference page, corrected in place — not a dated post.*