Money-Weighted Rate Of Return

What is a 'Money-Weighted Rate Of Return'

A money-weighted rate of return is a measure of the rate of return for an asset or portfolio of assets. It is calculated by finding the rate of return that will set the present values of all cash flows and terminal values equal to the value of the initial investment. The money-weighted rate of return is equivalent to the internal rate of return (IRR).

BREAKING DOWN 'Money-Weighted Rate Of Return'

There are many ways to measure returns for assets, and it is important to know which method is being used when reviewing asset performance. Money-weighted rate of return incorporates the size and timing of cash flows, so it is an effective measure for returns on a portfolio. Another popular return calculation is the Time-Weighted Returns method.

RELATED TERMS
  1. Portfolio Return

    The monetary return experienced by a holder of a portfolio. Portfolio ...
  2. Return

    The gain or loss of a security in a particular period. The return ...
  3. The Net Internal Rate Of Return ...

    A measure of a portfolio or fund's performance that is equal ...
  4. Mean Return

    1. In securities analysis, it is the expected value, or mean, ...
  5. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  6. Return On Capital Gains

    The return that one gets from an increase in the value of a capital ...
Related Articles
  1. Fundamental Analysis

    Calculating the Internal Rate of Return Using Excel

    The internal rate of return on investments is explained and illustrated in different investment scenarios.
  2. Fundamental Analysis

    Return on Investment (ROI) Vs. Internal Rate of Return (IRR)

    Read about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI).
  3. Investing Basics

    What's the Rate of Return?

    Rate of return is the earnings an asset generates in excess of its initial cost. The amount is usually expressed as an annualized percentage rate. Rate of return can be calculated based on the ...
  4. Fundamental Analysis

    Internal Rate Of Return: An Inside Look

    Use this method to choose which project or investment is right for you.
  5. Fundamental Analysis

    Gauge Portfolio Performance By Measuring Returns

    Calculate returns frequently and accurately to ensure that you're meeting your investing goals.
  6. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  7. Term

    Internal Rate of Return Formula for Excel

    The internal rate of return, or IRR, is a popular metric businesses use to measure a project’s return on investment.
  8. Investing Basics

    More Ways to Evaluate Portfolio Performance

    The Jensen measure is another tool investors use to include risk when measuring portfolio performance.
  9. Investing Basics

    How to Calculate Required Rate of Return

    Investors use the required rate of return to decide where to put their money, and corporations use it to decide if they should pursue a new project.
  10. Professionals

    How To Measure Returns On The Series 65 Exam

    An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ...
RELATED FAQS
  1. How do I calculate my portfolio's investment returns and performance?

    Learn the basic principles underlying the data and calculations used to perform personal rates of return on investment portfolios. Read Answer >>
  2. How is the expected market return determined when calculating market risk premium?

    Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >>
  3. What is the formula for calculating the internal rate of return (IRR)?

    Learn about the internal rate of return, an important concept in determining the relative attractiveness of different investments. Read Answer >>
  4. What is the formula for calculating internal rate of return (IRR) in Excel?

    Understand how to calculate the internal rate of return (IRR) using Excel and how this metric is used to determine anticipated ... Read Answer >>
  5. Why is the Modified Internal Rate Of Return (MIRR) preferable to the regular internal ...

    See why the modified internal rate of return is often a superior metric to the classic internal rate of return for assessing ... Read Answer >>
  6. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center