Money-Weighted Rate Of Return

AAA

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).

INVESTOPEDIA EXPLAINS '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. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Actual Return

    The actual gain or loss of an investor. This can be expressed ...
  3. Internal Rate Of Return - IRR

    The discount rate often used in capital budgeting that makes ...
  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. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
Related Articles
  1. Internal Rate Of Return: An Inside Look
    Fundamental Analysis

    Internal Rate Of Return: An Inside Look

  2. Surviving On An Irregular Income
    Options & Futures

    Surviving On An Irregular Income

  3. Which is a better measure for capital ...
    Budgeting

    Which is a better measure for capital ...

  4. Which leverage ratios are most useful ...
    Fundamental Analysis

    Which leverage ratios are most useful ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center