How to measure portfolio performance correctly
Portfolio performance is more than comparing the first balance with the last balance. Contributions, withdrawals, dividends and fees can make a simple start-to-end percentage misleading. This calculator separates those cash flows so the result is easier to interpret.
When no intermediate contributions or withdrawals exist, CAGR provides a useful annualized start-to-end growth rate. When cash flows do exist, FinanceTools deliberately does not label a simple annualized number as an exact CAGR, TWRR or money-weighted return.
Frequently asked questions
Why can contributions distort portfolio return?
Adding money increases the ending balance even if the investments did not perform well. A performance calculation should separate external cash flows from investment gain.
Why is CAGR unavailable when I enter contributions or withdrawals?
CAGR is a start-to-end compound growth rate. Intermediate cash flows change the capital base, so an exact performance rate requires timing-aware methods.
What is the difference between TWRR and money-weighted return?
Time-weighted return isolates investment performance across sub-periods, while money-weighted return reflects the size and timing of investor cash flows. Both require more detailed data than totals alone.
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