How this calculation works
A portfolio’s ending value can rise because money was added, even when its investments lost value. Time-weighted return separates the investment experience into subperiods around external cash flows and links their growth factors. This page requires those boundary valuations explicitly. It does not guess when a contribution arrived or treat every change in portfolio value as an investment gain.
TWR = product(end value/start value for each flow-separated period) − 1A worked example
The first example period grows from one hundred to one hundred ten, a ten-percent gain. A contribution then makes the next opening value two hundred ten, which falls to one hundred eighty-nine, a ten-percent loss. The linked factor is 1.1 multiplied by 0.9, or 0.99. Total time-weighted return is therefore minus one percent, even though the final portfolio value exceeds the original one hundred.
Good to know
Accurate valuations immediately around flows are required. Daily-weighted approximations, missing valuations, leverage changes and performance-reporting-standard compliance are not inferred. The calculation describes entered historical or hypothetical performance. It supplies no expected future return or recommendation to buy an asset, fund or portfolio.
Reference: CISI — subperiod return chain linking (opens in a new tab) ↗
What this calculation answers
A portfolio’s ending value can rise because money was added, even when its investments lost value. Time-weighted return separates the investment experience into subperiods around external cash flows and links their growth factors.
This page requires those boundary valuations explicitly. It does not guess when a contribution arrived or treat every change in portfolio value as an investment gain.
The XIRR and XNPV dated cash flow calculator measures money-weighted return from dated amounts. Time-weighted linking instead needs valuations immediately around external flows.
Use the right input conventions
For each row, opening value is measured immediately after the external flow that begins the period. Closing value is measured immediately before the next external flow. Both valuations must include the same complete portfolio boundary.
Opening values must be positive. Reinvested income retained inside the portfolio is part of investment performance rather than an external contribution. Use a consistent treatment of fees and accrued income across valuations.
Interpret the result
Subperiod percentages are compounded, not added or averaged. Each subperiod has equal influence through its growth factor regardless of how much money the investor happened to have at work during that period.
The result is not annualized because the form does not collect elapsed durations. It also differs from a money-weighted return such as XIRR, where the size and dates of cash flows affect the rate.
Work through the example
The first example period grows from one hundred to one hundred ten, a ten-percent gain. A contribution then makes the next opening value two hundred ten, which falls to one hundred eighty-nine, a ten-percent loss.
The linked factor is 1.1 multiplied by 0.9, or 0.99. Total time-weighted return is therefore minus one percent, even though the final portfolio value exceeds the original one hundred.
Where the model stops
Accurate valuations immediately around flows are required. Daily-weighted approximations, missing valuations, leverage changes and performance-reporting-standard compliance are not inferred.
The calculation describes entered historical or hypothetical performance. It supplies no expected future return or recommendation to buy an asset, fund or portfolio.
A few questions, answered
Why not average the two period returns?
Compounding a gain and an equal percentage loss does not restore the starting value; growth factors must be multiplied.
What changes in the comparison?
Change the second opening capital while preserving its return; the linked TWR stays the same.