Enter the returns for each period and the total number of periods into the calculator to determine the Money Weighted Return.

Money Weighted Return Formula

The following formula is used to calculate the Money Weighted Return (MWR). 

MWR = [(1 + r1) * (1 + r2) * ... * (1 + rn)]^{(1/n)} - 1

Variables:

  • MWR is the Money Weighted Return (%)
  • r1, r2, …, rn are the returns for each period (decimal)
  • n is the total number of periods

To calculate the Money Weighted Return, add 1 to each period’s return and then multiply these results together. Raise this product to the power of the reciprocal of the total number of periods. Subtract 1 from the result to get the Money Weighted Return.

What is a Money Weighted Return?

A Money Weighted Return is a measure of the rate of return on an investment, which takes into account the amount of money invested and the timing of those investments. It is a personalized measure of performance, as it reflects the individual investor’s specific investment decisions. It is particularly useful for investors who make large contributions or withdrawals at irregular intervals, as it can provide a more accurate reflection of their personal investment experience than other measures.

How to Calculate Money-Weighted Return?

The following steps outline how to calculate the Money Weighted Return (MWR).

  1. First, gather the returns for each period (r1, r2, …, rn) in decimal form.
  2. Next, use the formula MWR = [(1 + r1) * (1 + r2) * … * (1 + rn)]^(1/n) – 1 to calculate the Money Weighted Return.
  3. Finally, calculate the result by inserting the values of r1, r2, …, rn into the formula and solving for MWR.
  4. After calculating the MWR, check your answer with the calculator above.

Example Problem:

Use the following variables as an example problem to test your knowledge.

r1 = 0.05

r2 = 0.03

r3 = 0.02

n = 3