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 FAQS
  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 >>
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. Fundamental Analysis

    Efficiency Ratio

    There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ...
  4. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  5. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  6. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  7. Fundamental Analysis

    Interested In Pharmaceutical Stocks? Try Novartis (ADR)

    Novartis AG, is the world's leading pharmaceutical company by sales. Here is a closer look at Novartis, and how its financials stack up.
  8. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  9. Savings

    Top 10 Fastest Growing Industries in the United States

    Six of the ten fastest growing industries are directly related to new residential construction.
  10. Charts & Patterns

    How To Become A Private Equity Associate

    With the right planning, second- and third-year investment banking analysts can graduate to an associate position at a private equity firm.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center