You may notice that the money-weighted return shown on your dashboard does not match what you would expect if you simply compared your contributions to your current balance. This difference is normal and is primarily explained by when money was added to the account.
A quick example
You might see something like:
Total net contributions: $80,841
Current balance: $116,460
Growth: $35,618
Money-weighted return: 55%
At first glance, it’s natural to calculate growth as:
$35,618 ÷ $80,841 ≈ 44%
So why does the money-weighted return show a different number?
What a money-weighted return measures
A money-weighted return (MWR) takes into account the timing and size of all deposits and withdrawals.
It answers this question:
“Based on the exact dates and amounts of money going in and out of the account, what annualized rate of return did the account experience?”
Because of this, not all dollars are treated equally:
Money invested earlier has more time to grow
Money invested later has less impact on the overall return
Why the number is different from a simple growth calculation
Contributions were made over time
Most accounts receive contributions gradually rather than all at once. If markets performed well earlier in the account’s history, money invested early contributed disproportionately to growth.
As a result:
Early investments carry more weight in the calculation
Later contributions are weighted less heavily
This timing effect explains why the money-weighted return does not match a simple growth-to-contributions calculation.
This does not indicate an error
The money-weighted return is a standard financial measure and is calculated correctly based on actual cash flows.
A simple growth calculation assumes:
All money was invested at the same time
All dollars were invested for the same length of time
In practice, this is rarely the case.
Money-weighted return vs. portfolio performance
These two metrics answer different questions:
Money-weighted return
Reflects the return experienced by your personal contributions, accounting for timing.Portfolio (time-weighted) return
Reflects how the investment strategy performed, independent of deposits and withdrawals.
Both are useful, but they are designed for different purposes.
In summary
The money-weighted return reflects when money was invested
Contributions made at different times affect the result
Differences between growth and money-weighted returns are expected
If you’d like help interpreting your returns or understanding how they relate to your financial goals, our team is always happy to assist.