Money Weighted Return (MWR) Calculator

Formula

To calculate the Money Weighted Return (MWR):

\[ MWR = \left( \prod_{i=1}^{n} (1 + r_i) \right)^{\frac{1}{n}} - 1 \]

Where:

\(MWR\) is the Money Weighted Return (%)
\(r_1, r_2, \ldots, r_n\) are the returns for each period (decimal)
\(n\) is the total number of periods

What is a Money Weighted Return?

A Money Weighted Return is a measure of the rate of return on an investment, which takes into account the amount of money invested and the timing of those investments. It is a personalized measure of performance, as it reflects the individual investor's specific investment decisions. It is particularly useful for investors who make large contributions or withdrawals at irregular intervals, as it can provide a more accurate reflection of their personal investment experience than other measures.

Example Calculation 1

Let's assume the following returns for three periods:

Return for Period 1 (\(r_1\)) = 0.05
Return for Period 2 (\(r_2\)) = 0.10
Return for Period 3 (\(r_3\)) = -0.02

Using the formula:

\[ MWR = \left( (1 + 0.05) \times (1 + 0.10) \times (1 - 0.02) \right)^{\frac{1}{3}} - 1 = 0.0411 \text{ or } 4.11\% \]

The Money Weighted Return is 4.11%.

Example Calculation 2

Let's assume the following returns for four periods:

Return for Period 1 (\(r_1\)) = 0.08
Return for Period 2 (\(r_2\)) = 0.12
Return for Period 3 (\(r_3\)) = -0.03
Return for Period 4 (\(r_4\)) = 0.06

Using the formula:

\[ MWR = \left( (1 + 0.08) \times (1 + 0.12) \times (1 - 0.03) \times (1 + 0.06) \right)^{\frac{1}{4}} - 1 = 0.0563 \text{ or } 5.63\% \]

The Money Weighted Return is 5.63%.