What question does a return answer?
When an account receives deposits, withdrawals or regular contributions, ending value minus starting value can confuse cash-flow timing with investment skill. A large contribution before a rally can raise dollar profits without proving that every investment decision was better.
Time-weighted return (TWR) divides the record at each external cash flow, calculates each subperiod’s return and links them together. It asks: excluding the timing of added or removed capital, how did this portfolio or strategy perform?
TWR and actual profit are both useful
TWR does not replace actual return. Your actual wealth depends on how much money was invested and when. TWR is more suitable for comparing a strategy, manager or different periods without cash-flow distortion.
Two people can own the same ETF but invest at different times; their dollar gains can differ sharply. TWR helps describe investment performance across the holding periods, while net asset value and cash flows describe personal wealth outcomes.
Using the calculator
In My Performance, enter period-end balances and net deposits to calculate TWR and annualized results. Missing withdrawals, incorrect balances or treating investment gains as external cash flows will distort the calculation.
The goal of a performance record is not a flattering number. It is a way to review whether returns came from market exposure, selection, sizing or a single favorable period. Historical performance never guarantees future results.