Money-Weighted Return (MWR)
A return measure that accounts for the size and timing of every cash flow an investor makes. It answers what your particular money actually earned; XIRR is its standard calculation.
Mathematical Formula
Context & Practical Application
What is Money-Weighted Return? (Simple Terms)
Money-weighted return (MWR) answers a different question: what did your money actually earn? It counts every amount you invested or withdrew, and when.
Two people can hold the same fund over the same years and earn different money-weighted returns. Invest ₹1,00,000 just before a rally and your MWR beats a friend who invested just before a fall.
Understanding Money-Weighted Return
Its standard calculation is XIRR, the annual rate that makes your cash flows add up to today’s value. For a SIP, every instalment enters with its own date, and the newest have had the least time to compound, so a SIP’s money-weighted return often sits below the fund’s time-weighted return.
That is why your SIP can trail the advertised fund number. The CAGR vs XIRR guide works through one fund showing three different returns.
Mathematical Analysis of Money-Weighted Return
MWR is the rate that zeroes the present value of every dated cash flow:
where is the -th cash flow (negative when you invest, positive when you redeem) and is its time in years. There is no closed-form solution; is found iteratively, and the XIRR Calculator or Excel’s XIRR will match if the dates are right. Edge cases: flows that change sign more than once can allow multiple valid roots, and the number ignores the risk taken.
Referenced In Guides & Comparisons
Learn how Money-Weighted Return (MWR) is applied in real-world scenarios across our pathways: