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Time-Weighted Return Calculator

Enter each sub-period return to compound them into a single time-weighted return, see the annualized-equivalent rate, and view the growth of $10,000.

How it is calculated

The three sub-period returns are turned into growth factors, multiplied together and converted back to a percentage.

factori = 1 + Ri ÷ 100
TWR = (f1 × f2 × f3 − 1) × 100
annualized = ((f1 × f2 × f3)1/3 − 1) × 100
growth = 10,000 × f1 × f2 × f3

Each Ri is the return of one sub-period in percent, measured just before and after any deposit or withdrawal, so cash flows do not distort it. All three fields must be filled; leaving one empty gives no result (enter 0 for a flat period). A return below −100% is rejected, while exactly −100% is accepted and wipes out the balance. The "annualized" figure is the geometric average per sub-period, so it equals a true annual rate only if each sub-period is one year long.

Worked example

A fund returned 8% in the first period, −5% in the second and 12% in the third. The factors are 1.08, 0.95 and 1.12. Multiplying: 1.08 × 0.95 × 1.12 = 1.14912, so the time-weighted return is 14.91%. The cube root of 1.14912 is about 1.0474, giving 4.74% per period. Applying the product to $10,000 gives $11,491.20. Note that the −5% period cost more than a simple sum (8 − 5 + 12 = 15%) suggests: compounding gives 14.91%, not 15%.

Try this example →

Common mistakes

  • Adding the percentages instead of compounding them. 8, −5 and 12 sum to 15%, but chained they give 14.91%; the gap widens with larger swings.
  • Leaving the third field blank because only two periods happened. The tool then shows nothing; enter 0 so that period has no effect, but remember the annualized figure still divides by three.
  • Reading the annualized figure as a yearly rate when the sub-periods are quarters or months. It is the average per sub-period, so with three quarters it is a quarterly rate.
  • Entering the end balance of each period instead of its percentage return. Each box takes the percent change within that period.
  • Using the result to judge your own account when you added money mid-period. A time-weighted return ignores timing of deposits by design, so it will not match your actual gain in dollars.

About this calculator

Time-Weighted Return (TWR) measures investment performance by geometrically chaining (compounding) the returns of consecutive sub-periods, which strips out the distorting effect of when money was deposited or withdrawn. This makes it fundamentally different from a money-weighted return like IRR, which is sensitive to the size and timing of cash flows.

TWR is the standard required by the Global Investment Performance Standards (GIPS) for reporting portfolio manager performance, precisely because it isolates the manager's investment decisions from the investor's decisions about when to add or remove capital — two managers with identical stock-picking skill but different client cash-flow timing would show different money-weighted returns but identical time-weighted returns.

This calculator chains up to three sub-period percentage returns into a single time-weighted return, converts that into an annualized-equivalent rate, and shows what a $10,000 investment would have grown to, giving you a clean way to evaluate performance independent of your own deposit and withdrawal timing.

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