Dollar Weighted Return Calculator
Your portfolio’s return is not just where it started and ended: it is when you added and withdrew money along the way. The dollar-weighted return, the same thing as the internal rate of return (IRR), finds the single annual rate that makes every cash flow grow into your ending value. This calculator solves it with the same iterative math spreadsheets use. Compare it with long-horizon compounding on our investment growth calculator, or set the savings target first with our savings goal calculator.
Solved by Newton-Raphson iteration on the IRR equation. For exact calendar dates instead of year fractions, use a spreadsheet XIRR.
Quick Answer
Invest $10,000, add $2,000 after one year, and finish with $15,000 after three years: your dollar-weighted return is about 8.18% a year. A naive start-to-finish comparison says 7.7%, because it treats the late $2,000 deposit as if it had been invested the whole time. Enter your own cash flows above.
- Quick Answer
- What dollar-weighted return actually measures
- Worked example: the three-year portfolio
- Dollar-weighted vs time-weighted: the comparison that matters
- When dollar-weighted return misleads you
- What competing dollar-weighted calculators get wrong
- Frequently asked questions
- Add This Calculator to Your Website
- References
What dollar-weighted return actually measures
Imagine two investors in the same fund. One puts in $10,000 on day one; the other adds money right before a rally. The fund’s own performance is identical, but the second investor’s experience is better because more of their money rode the good stretch. Dollar-weighted return captures that: it weights each period by how much of your money was actually in it [1]. The CFA curriculum frames it as the internal rate of return of your personal cash flows, the rate r that solves:
Sum of CF(t) / (1 + r)^t = 0
with deposits as outflows, withdrawals as inflows, and your ending value as the final inflow [2]. There is no pencil-and-paper solution; the calculator iterates (Newton-Raphson) until the equation balances, the same approach behind spreadsheet IRR functions [3].
Worked example: the three-year portfolio
The defaults tell a common story: $10,000 invested at the start, a $2,000 deposit after year one, and $15,000 at the end of year three.
Note the naive answer for comparison: ($15,000 – $12,000) / $12,000 = 25% total, or about 7.7% annualized. The true 8.18% is higher because the first $10,000 worked the full three years while the $2,000 only worked two [4].
Dollar-weighted vs time-weighted: the comparison that matters
Dollar-weighted (this calculator)
- Answers: what annual rate did my money earn, given when I put it in?
- Includes every deposit and withdrawal with its timing.
- The right number for your personal performance and for retirement accounts you control.
Time-weighted
- Answers: how did the investment itself perform, ignoring my deposits?
- Strips out cash flows by splitting the period at each one.
- The right number for grading a fund manager, who does not control your deposits [2][5].
When the two disagree, the gap is your timing. If your dollar-weighted return beats the time-weighted one, you added money before good stretches; if it lags, your timing worked against you [1]. Morningstar’s research found exactly this pattern at scale: investors in volatile funds earned far less on a dollar-weighted basis than the funds’ reported time-weighted returns, because they bought high and sold low [6].
Key takeaways
- Dollar-weighted return = IRR of your personal cash flows, timing included.
- Use it for your own performance; use time-weighted to grade a manager.
- A gap between the two measures your timing luck, good or bad.
- For exact calendar dates, a spreadsheet XIRR is more precise than year fractions.
When dollar-weighted return misleads you
Three honest limits. First, it says nothing about risk: 8.18% earned smoothly and 8.18% earned on a roller coaster are the same number here, so pair it with a risk measure like standard deviation for the full picture [1]. Second, it is yours alone: you cannot fairly compare your dollar-weighted return with someone else’s, because your deposit schedules differ. Third, very short periods and extreme flows can produce wild or multiple mathematical solutions; the calculator flags cases it cannot solve cleanly rather than printing nonsense.
What competing dollar-weighted calculators get wrong
Typical DWR tools
- One popular tool uses a timing-free formula that gives 7.72% on the worked example above: wrong by nearly a full point.
- Another publishes a money-weighted formula that is algebraically meaningless.
- Most never explain the difference from time-weighted return, so users compare incomparable numbers.
This calculator
- Solves the true IRR equation with Newton-Raphson, honoring each flow’s timing.
- Shows total invested, total received, net profit, and the simple return alongside the annualized rate.
- Explains when to use dollar-weighted vs time-weighted, with the CFA framing cited.
Frequently asked questions
Yes, for portfolio measurement. Dollar-weighted return is the internal rate of return of your investment cash flows. XIRR is the same idea using exact calendar dates instead of year fractions, which is more precise for irregular timing.
Brokerages usually show time-weighted return, which measures the investments’ performance with your deposits stripped out. Your dollar-weighted return can be higher or lower depending on your timing. Both are correct; they answer different questions.
You lost money overall after accounting for timing: what came out (withdrawals plus ending value) is worth less than what went in, in present-value terms. It does not necessarily mean the investments were bad; terrible timing alone can do it.
No, not directly. Advertised fund returns are time-weighted. To judge the fund, compute or look up its time-weighted return. To judge your experience in it, use dollar-weighted.
Only if you include them. Enter fees as withdrawals (money taken out) and after-tax values as your ending figure, and the result becomes an after-fee, after-tax return. Otherwise the answer is gross of both.
Context decides. Over long periods, 6-10% annualized is strong for a diversified portfolio; above 15% is exceptional and below 0% is a loss. Compare against a relevant benchmark over the same period, not against other investors’ personal numbers.
The IRR equation has no closed-form solution and can have no solution, or several, for extreme cash-flow patterns (for example, ending values wildly inconsistent with the flows). The calculator reports the failure instead of printing a misleading number; a spreadsheet XIRR with exact dates sometimes resolves it.
Add This Calculator to Your Website
Put this dollar weighted return calculator on your own website or blog. Copy the code below and paste it into your page HTML. The embedded calculator updates automatically whenever we improve it.
References
[1] O'Connell, R. (CFA). “Time-weighted vs money-weighted return: key differences.” MWR vs TWR interpretation, IRR vs XIRR. ryanoconnellfinance.com (Accessed Oct 17, 2026).
[2] O'Connell, R. (CFA). “Money-weighted return calculator.” Newton-Raphson IRR method, performance bands. ryanoconnellfinance.com (Accessed Oct 17, 2026).
[3] CFA PrepBuddy. “Rates and returns: money-weighted and time-weighted return.” CFA Level 1 learning outcome summary. CFA PrepBuddy (Accessed Oct 17, 2026).
[4] Wall Street Oasis. “Money vs. time-weighted return.” GIPS reporting standards for MWR vs TWR. Wall Street Oasis (Accessed Oct 17, 2026).
[5] Financial Advisor Magazine. “Fund returns: theory vs. experience.” Morningstar dollar-weighted return research (Kaplan, Kinnel). Financial Advisor Magazine (Accessed Oct 17, 2026).
[6] Portseido. “Should you use simple return, time-weighted, or money-weighted?” Dated cash-flow MWR formula. Portseido (Accessed Oct 17, 2026).
[7] EduRev. “Rates and returns: quantitative methods (CFA Level 1).” IRR worked example, sign conventions. EduRev (Accessed Oct 17, 2026).
[8] Brainscape. “MIP Ch 12: evaluating portfolio performance.” MWR equation and TWR vs MWR conditions. Brainscape (Accessed Oct 17, 2026).
[9] NumberAnalytics. “Mastering IRR in cost estimation.” IRR as the NPV=0 rate; trial-and-error and Newton-Raphson methods. NumberAnalytics (Accessed Oct 17, 2026).
[10] Peak Frameworks. “Explaining the internal rate of return (IRR).” IRR equation and numerical solution methods. Peak Frameworks (Accessed Oct 17, 2026).