Calculating Your Money-Weighted Rate of Return (MWRR)

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In Part 2 of his rate of return video series, Justin shows investors how to calculate their money-weighted rate of return (MWRR) and also explains how the MWRR differs from the time-weighted rate of return (TWRR).
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Опубликовано:

14 апр 2021

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Комментарии : 53

@JustinBenderCPM 3 года назад

100% of RU-vid revenues received by the Canadian Portfolio Manager channel have been donated to SickKids Foundation. If this video has helped save you a few dollars on fees or taxes, please consider donating a portion of your savings to SickKids Foundation: www.sickkidsfoundation.com/

@Pieter2360 5 месяцев назад

Excellent explanation; much more clear than how this is explained in the CFA curriculum.

@danielbarrett8560 2 года назад

The best explanation of MWRR I have ever heard, thanks!

@JustinBenderCPM 2 года назад

@Daniel Barrett - Thanks!

@shaikshb Год назад

well articulated with examples. Thank you Justin.

@romitbarat 2 года назад

Amazing Illustration and discussion.

@AurelioPita 2 года назад

Great explanation. Many thanks. Subscribed.

@michielnooren2076 2 месяца назад

Perfectly explained! Thanks!

@hishamalhashmi7394 2 месяца назад

very clear when you watch the two videos

@vijayreddy301 6 месяцев назад

such an awesome teacher you are. liked and subbed

@chariscchi3140 2 года назад

Thank you very much again as it helps me to understand more re calculating for the rate of return. May i ask you when it's Cash Portfolio, holding term deposits and Term Annuities, what would be the appropriate method to calculate the performance returns of this cash portfolio

@OscarWithC 3 месяца назад

Great video!

@okechukwuutazi9373 28 дней назад

Awesome video

@legomgom 2 года назад

Thanks for doing this, very clear! As a nerd I guess I would have loved to see the math in the same way you did for time weighted rate of return, but still thanks so much!

@JustinBenderCPM 2 года назад

@Kirkby - If you're interested in the detailed equations, they can be found in our white paper: www.pwlcapital.com/wp-content/uploads/2018/06/2015-07-10_PWL_Bender-Bortolotti_Understanding-your-portfolio-s-rate-of-return_Hyperlinked.pdf

@legomgom 2 года назад

@@JustinBenderCPM Wow that's an amazing white paper, thanks for doing that!!

@zacalhaj 2 года назад

Excellent illustration

@JustinBenderCPM 2 года назад

@Zac Alhaj - We're glad you found it useful :)

@lpgoog 3 года назад

Excellent presentation! MWRR seems like an important consideration for investors especially when measuring their wealth advisor’s performance. Probably why they include it as part of the CRM2 year end statement. Here’s something I never read about: Question: What is the opportunity cost of the wealth advisor’s fee coming out of accounts? Example: Dividends and capital gains reinvested vs. systematically taking out fees from the firm/advisor. Seems costly over time even at 1%. Wouldn’t it be more prudent to pay an advisor separately and let investments compound at their maximum over time?

@JustinBenderCPM 3 года назад

@Ipgoog - To measure a wealth advisor's performance, an investor should generally use a TWRR (not a MWRR). Any fees are going to lower the portfolio return. If you pay them directly (instead of through the portfolio cash flow), you wouldn't be able to save as much to your portfolio (so the impact of fees on portfolio growth would presumably be similar in both scenarios).

@lpgoog 3 года назад

@@JustinBenderCPM Thx so much for taking the time to respond. 🙏 Excellent channel to say the least!

@bdvd 3 года назад

Is there an easy way to find out what your portfolio was worth on a certain date? (I'm on Quest) Thanks for a great video, Justin!

@JustinBenderCPM 3 года назад

@Brett Davidson - Not that I know of - we're going to be releasing a video on the linked Modified Dietz Method, which may be easier to calculate if you can dig up at least monthly statements.

@boojiboy16 6 месяцев назад

I don't understand the point of MWRR. What can I do with the figure it calculates? I have an account that shows 15% growth using MWRR but ust 8% simply comparing nd value to initial. With the 8% figure I can compare the performance to other things such as savings accounts but the 15% figure??? it takes into account investment timing but can't predict when to invest. What do I use the 15% for??

@dxelson 2 года назад

How does this apply if I sometimes have cash on my brokerage account and my contributtions are actually cash deposits into the brokerage account to be invested in a later date? Ex: I deposit $3000 every 6 months (equivalent to $500/month), after I deposit this money slowly invest that money up to $500 per month, if i encounter a huge dip i may invest more than $500 or even all of the remaining cash. If i end up with no cash i just wait until the 6 months are up and repeat depositing $3000. I do this to reduce deposit fees, ideally i would invest monthly, but I rather pay fees twice a year than 12 times a year.

@JustinBenderCPM 2 года назад

@dxelson - It still applies the same way. Whenever you add cash to your brokerage account (whether you purchase anything with it), it should be included. The MWRR return will penalize you if you miss out on returns sitting in cash, and reward you if your lucky market timing avoids a market drop.

@piranhaprofitsleo 3 года назад

Hi Justin, can I check with you, regarding the XIRR formula in excel, if the dates are more than 1 year (eg 3 years), it would only calculate annualised returns right? How can I calculate my total returns? just simply x3 in this case?

@JustinBenderCPM 3 года назад

@Ming Jie Wan - Correct - if the measurement period is more than 1 year, the XIRR formula in excel will annualize the total return. To calculate a 3-year total return (using the annualized returns), simply add 1 to your annualized return, take this figure to the exponent of 3 (i.e. ^3), and subtract 1 from the end result.

@piranhaprofitsleo 3 года назад

@@JustinBenderCPM perfect. Thank you for your swift response! I've managed to calculate my accumulated total returns!

@eduardodelagarza3318 2 года назад

@@JustinBenderCPM Can you explain how to do it if the dates are just 2 or 3 days apart? Thanks!

@asyrafsalman5808 2 года назад

@@JustinBenderCPM Hello, just to clarify. By the same token, when dealing with more than 1 periods, the Time-Weighted Return calculations results in a cumulative % return figure right? Therefore we would need to annualize that first ((1+x)^(1/n)) before we compare that to the XIRR figure when comparing against the Money Weighted Return? Thanks!

@stim178 2 года назад

Let's say we adopt a practice of using Money weighted return, and then we recieved a substantial cash flow for one month causing performance to be skewed for the 1 year performance. For that skewed one month period, is it okay revert to time weighted return to capture the true performance...just for this time period?

@stim178 2 года назад

Basically can I flip flop the methods based on the substantial cash flows? Or do I keep consistent with one method?

@JustinBenderCPM 2 года назад

@stim178 - If you were using a monthly MWRR (i.e., chain-linking the monthly MWRR returns), switching to a TWRR for a single month would be fine. I'm not certain how it would work for a regular MWRR.

@thechickenduck8377 3 года назад

Why does the Excel tutorial on that XIRR function say the starting amount needs to be negative? (the one from Microsoft Help)

@JustinBenderCPM 3 года назад

@TheChickenDuck - The Excel tutorial is also technically correct, but if you make the starting values negative, you would need to make the ending values positive. As well, contributions would need to be entered as negative figures, while withdrawals would need to be entered as positive values. As this method is a bit confusing, I felt my method would make more sense to new investors.

@thechickenduck8377 3 года назад

@@JustinBenderCPM it does , and thanks so much for the insightful videos !

@thechickenduck8377 3 года назад

@Jack Durham maybe that’s because Americans love debt 😅. Thanks for the insight.

@manuelaguilarbarrera5151 2 года назад

Hey Justin, if I calculate the MWRR per year, 2020, 2021, etc -> how with this MWRR of each year I can calculate my cumulative total return of all my portafolio since day 1? I have my personal portafolio and each month I make contributions Thanks in advance 🤗

@JustinBenderCPM 2 года назад

@Manuel Aguilar Barrera - If you add 1 to each of your annual returns, multiply these results together, and subtract 1, this will give you a cumulative return. For example, if your portfolio returned 10% in 2020 and 15% in 2021, the calculation would be: ((1 + 0.1) x (1 + 0.15)) - 1 = 0.265 or 26.5% (please note this is not an average or annualized return).

@manuelaguilarbarrera5151 2 года назад

@@JustinBenderCPM Thanks for the answer! Following the example of a 26.5% cumulative return at year 2: If I want to obtain my average annualized return of that two years... This formula, it's correct? Average annualized return = (1+cumulative return)^(1/years)-1? In this example: (1+26.5%)^(1/2)-1=12.47%

@skube 3 года назад

Is it not a strange choice of the CSA to make MWRR the standard?

@JustinBenderCPM 3 года назад

@skube - I may be a bit cynical, but it is "convenient" that the MWRR cannot be accurately compared to the active strategies of most advisors/portfolio managers ;)

@lh7766 7 месяцев назад

Can you calculate it using financial calculator ?

@JustinBenderCPM 7 месяцев назад

@lh7766 - I think you can, but it's much more complicated than simply using Microsoft Excel.

@dmehta3476 2 года назад

Why don’t you help make a spreadsheet for retail investors where we can calculate stocks return With MWRR

@JustinBenderCPM 2 года назад

@D Mehta - There are already many existing MWRR calculators available online: wealthsavvy.ca/money-weighted-rate-of-return-calculator/

@maximeleroux5286 3 года назад

I still think Micahel should have been Gob, and Gob should have been Michael, cuz Michael is the smart one

@JustinBenderCPM 3 года назад

@Maxime Leroux - haha, good point! But Michael is the chicken of the family ... remember when he was afraid to ask out Sally Sitwell? ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-7M6Tgf5Nsik.html