Time-Weighted Return

The yield that the investment item itself has achieved. This is the
intrinsic performance, ignoring the timing of any external cash flows. Use this
return when creating or comparing against advertised performance numbers. See
Yield Calculations for a discussion of the differences
between ROI and TWR yields. TWR can be displayed for any investment,
symbol, asset type, investment goal, sector, investment type, currency, or sub-portfolio. The formula for calculating the true
time-weighted return is:

where *EMV*_{i}
is the market value at the end of sub-period i, excluding any
cash flows in the period. *BMV*_{i}
is the market value at the end of the previous sub-period (i.e., the beginning
of the current sub-period), plus any cash flows at the end of the previous
sub-period, where an inflow is positive and an outflow is negative. The
cash inflow is included in the BMV
(previous period EMV + positive
cash inflow) of the sub-period when the cash inflow is available for investment
at the start of the sub-period; a cash outflow is reflected in the
BMV (previous period
EMV + negative cash outflow) of the
sub-period when the cash outflow is no longer available for investment at the
start of the sub-period.

The sub-period returns are then geometrically linked to
calculate the period’s total return according to the following formula:

where *R*_{TR} is the period’s total return and *
R*_{1}, *
R*_{2}… *
R*_{n} are the sub-period returns
for sub-period 1 through *n* respectively.

**Annualizing:**

By default, yields for terms less than one year are not annualized, and
yields for terms greater than one year are average annualized. Whether or
not to average annualize yields can be controlled from the
Preferences - Yield dialog.

**Accrued Interest:**

By default, accrued interest is
included in yield calculations. Accrued interest for the beginning and
ending of each sub-period is added into BMV
/ EMV. Whether or
not to include accrued interest in the yield calculations can be controlled from the
Preferences - Yield dialog.

**Example Calculation:**

Assume we are calculating the 6 month (non-annualized) TWR ending on
12/31/2009. The date range for this yield term would be 7/1/2009 through
12/31/2009, inclusive of gains on both the starting and
ending dates. The following hypothetical details are used in this example:

Market value at beginning of 7/1/09: $1,000

Purchased additional $1,200 on 8/13/09

Market value at end of 8/13/09 was $1,200 before the new purchase, market
value was $2,400 after purchase

Received a cash dividend on 9/30/09 for $50

Market value at end of 9/30/09 was $2,500 (not counting the dividend)

Market value at end of 12/31/09: $2,600

No accrued interest.

BMV_{1} = 1000; EMV_{1}
= 1200; R_{1} = 20%

BMV_{2} = 2400; EMV_{2}
= 2550; R_{2} = 6.25%

BMV_{3} = 2500; EMV_{3}
= 2600; R_{3} = 4%

and we then combine the sub-period returns together, to get the total period
return:

R_{TR} = (1.2 x 1.0625 x 1.04) - 1 =
32.6%

**Logging Details:**

Fund Manager can optionally log the TWR calculation details to an external log
file. See General Preferences / Yields.

### See Also

Yield Calculations

Return On Investment

Interpolation Range

Preferences - Yield