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. The Net Internal Rate Of Return ...

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

    1. In securities analysis, it is the expected value, or mean, ...
  4. Return On Capital Gains

    The return that one gets from an increase in the value of a capital ...
  5. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  6. Pooled Internal Rate Of Return ...

    A method of calculating the overall internal rate of return (IRR) ...
Related Articles
  1. Professionals

    Money Vs. Time-Weighted Return

    CFA Level 1 - Discounted Cash Flow Applications - Money Vs. Time-Weighted Return
  2. Professionals

    Rates of Return

    FINRA/NASAA Series 66 Section 1 - Rates of Return. In this section internal rate of return (IRR), real return, expected return and risk-adjusted return.
  3. Professionals

    Measuring Portfolio Returns

    NASAA Series 65: Section 16 Measuring Portfolio Returns. In this section different types of risk measures discussed and some sample questions.
  4. Professionals

    Rates of Return - Internal Rate of Return

    FINRA/NASAA Series 65 - Rates of Return - Internal Rate of Return. In this section Internal rate of return, real return, risk-adjusted return, beta and total return.
  5. Required Return, Discount Rate and IRR: Concepts & Examples

    Required return is a minimum level of rate of return that investors would agree to accept for a particular investment as compensation for delaying consumption and taking risk. This is also called ...
  6. Professionals

    Introduction

    FINRA/NASAA Series 66: Section 2 Measuring Portfolio Returns. This section discusses different return measures: return on investment, holding period, annualized, risk free and total returns.
  7. 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.
  8. Professionals

    Risk and Return Measures

    Risk and Return Measures
  9. Forex

    Understanding Internal Rate Of Return

    Internal rate of return, or IRR, is one of the most popular methods of evaluating potential projects. Learn more about this important metric.
  10. 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).
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. What is the relationship between the hurdle rate (MARR) and the Internal Rate of ...

    Find out how companies and managers use hurdle rate, or MARR, and internal rate of return, or IRR, to evaluate projects and ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center