What is money weighted rate of return?

1. MWRR is a method to calculate the rate of return of a portfolio.

2. MWRR takes into consideration the impact of contributions to, or withdrawals from the portfolio.

3. If an investor contributes a significant sum into a portfolio just prior to the portfolio’s performance rising, this larger portfolio benefits more in rupee terms than if the contribution had not been made.

4. If investor withdraws a large sum from portfolio just prior to portfolio’s performance rising, this smaller portfolio benefits less from portfolio’s growth than if the withdrawal had not been made.

5. It is mainly used to compute individual portfolio returns as timing and amount of contributions and withdrawals can be different for each individual investor’s portfolio.

6. MWRR helps to assess personal portfolio performance relative to your individual financial plans and projections.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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