Mike Benson’s Blog

I will start in the same place I did with Internal Rate of
Return; the dictionary definition. I will then dive into what that means for
the rest of us.

“Time Weighted Return - Portfolio accounting method that measures investment performance (income and price changes) as a percentage of capital “at work,” effectively eliminating the effects of additions and withdrawals of capital and their timing that distort Dollar-Weighted return accounting.”
Barrons Dictionary of Finance and Ivestment Terms

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A major part of my programming and personal knowledge are in the area of finance and financial calculations. I have been in that space for pretty much all of my working adult life (15+ years). I have worked on several production systems for public use and numerous systems for internal (1 firm) use.

I decided that in this version of my blog I would start sharing some of the knowledge in both technical (programming terms) and some of it in personal or business terms. I am writing this post because IRR vs. TWR and when to use each one is confusing to many investors. I will start with IRR then go To TWR and then I may put some code up on how to calculate these. Now on to the post.

“Internal Rate of Return (IRR) discount rate at which the present value of the future cash flows of an investment equal the cash flows of an ivestment equal the cost of the investment.”
Barrons Dictionary of Finance and Ivestment Terms

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