Money-Weighted Rate Of Return


DEFINITION of 'Money-Weighted Rate Of Return'

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.

  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present ...
  3. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  4. Return

    The gain or loss of a security in a particular period. The return ...
  5. Rate Of Return

    The gain or loss on an investment over a specified period, expressed ...
  6. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
Related Articles
  1. Fundamental Analysis

    Internal Rate Of Return: An Inside Look

    Use this method to choose which project or investment is right for you.
  2. Options & Futures

    Surviving On An Irregular Income

    Being self-employed provides freedom, but only if you learn to make your money last.
  3. Economics

    What Happens in a Make-or-Buy Decision?

    A make-or-buy decision happens when a company must choose to either manufacture an item itself, or buy it premade from a supplier.
  4. Investing

    A Look at 6 Leading Female Value Investors

    In an industry still largely predominated by men, we look at 6 leading female value investors working today.
  5. Term

    What Is Financial Performance?

    Financial performance measures a firm’s ability to generate profits through the use of its assets.
  6. Stock Analysis

    The Biggest Risks of Investing in FireEye Stock

    Examine the current state of FireEye, Inc., and learn about some of the biggest risks of investing in this cybersecurity company's stock.
  7. Stock Analysis

    The Biggest Risks of Investing in Gilead Stock

    Examine the current position of Gilead Sciences, Inc., and learn the major risks for investors considering buying Gilead stock.
  8. Fundamental Analysis

    Create a Monte Carlo Simulation Using Excel

    How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel.
  9. Stock Analysis

    AT&T Stock: A Dividend Analysis

    Discover analysis of AT&T dividend policies, and explore the dividend policies of its main competitors, China Mobile Limited and Verizon Communications.
  10. Fundamental Analysis

    Top Reasons IPO Valuations Miss The Mark

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
  1. Which is a better measure for capital budgeting, IRR or NPV?

    In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each ... Read Full Answer >>
  2. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  3. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the formula for calculating weighted average cost of capital (WACC) in Excel?

    When analyzing different financing options, companies need to look at how much it will cost to fund operations. There are ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!