How To Understand Investment Returns (MWR vs TWR??)

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How To Understand Investment Returns (MWR vs TWR??)
In this video, we’re breaking down the different ways to measure investment returns. We’ll focus on simple return, time-weighted return, and money-weighted return. By the end of this video, you should better understand how to appropriately measure your investment performance.
Key takeaways
#1 - The simple rate of return (RoR) is used to measure the profit or loss of an investment over time. It does not take into account any cash flows in or out of the investment.
#2 - The time-weighted return (TWR) helps eliminate the impact that the timing of your deposits and withdrawals can have on your return.
#3 - The money-weighted rate of return (MWRR) calculates the performance of an investment that accounts for the size and timing of deposits or withdrawals.
#4 - The money-weighted return is equivalent to the internal rate of return (IRR).
✍️ HELPFUL LINKS ✍️
✦Learn more about Wealthfront here 👉 bit.ly/3LOo2cg
🕒 TIMESTAMPS 🕒
00:00 - Intro
00:59 - Simple return
02:25 - Time weighted return
04:50 - Money-weighted return
06:15 - MWR vs TWR
08:24 - Complex example
📝 DISCLOSURE 📝
The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Wealthfront Advisers and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisors to discuss tax-related matters specific to their situation. Investment advisory services are provided by Wealthfront Advisers LLC, an SEC-registered investment adviser, and brokerage products and services are provided by Wealthfront Brokerage LLC, Member FINRA/SIPC.
Sources
support.wealthfront.com/hc/en....
www.investopedia.com/terms/t/...
www.investopedia.com/terms/r/...
blog.wealthfront.com/whats-yo...
blog.wealthfront.com/whats-yo...

Опубликовано:

8 июл 2024

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Комментарии : 23

@manuppatel2760 Год назад

This is the first time in years I heard the presentation that clearly shows various methods of calculating investment preformance. Thank you so much!!

@wealthfrontvideos Год назад

Thanks for watching!

@cascade1125 7 месяцев назад

Respect on being able to pyramid your hands for so long

@wealthfrontvideos 7 месяцев назад

lol

@eltraveluis 6 месяцев назад

Thank you- excellent explanation

@Ronnyboy242 11 месяцев назад

Best explanation I’ve seen. Thanks 👍🏾

@wealthfrontvideos 10 месяцев назад

Glad it was helpful!

@mekaeldiwan Год назад

You made it so easy to understand while also going into detail. Thank u❤

@wealthfrontvideos Год назад

Thanks!

@esushruth 4 месяца назад

Thank you for the excellent explanation. I use wealthfront and JP morgan for my investment needs. I am trying to compare the performances of both these portfolios but I have noticed that while Wealthfront gives both the time weighted and money weighted returns, JP morgan appears to only provide money-weighted return or Internal rate of return. Is there a way that i can find out the TWR of my JP morgan portfolio? Thanks

@robertmoore2404 Год назад

Thanks for this...I was struggling to understand these...now I have some idea at least 😂

@wealthfrontvideos Год назад

Thanks!

@Inquisitive9 Год назад

Thank you for making the video. Some definitions flew over my head as I am novice, but would you agree that if I am looking for how much money I have personally made over the years, then I should be looking at Money Weighted Return of my investments, however, if I was comparing two index funds, I should look at their Time weighted returns. Correct? My bank account shows both, and I can't figure out if I made smart investments and if I am getting the return I targeted.

@wealthfrontvideos Год назад

Yeah that’s a great way to look at it!

@Inquisitive9 Год назад

@@wealthfrontvideos Thank you for confirming

@manp1039 Год назад

on wealthfront it doesn't appear i am getting an accurate percentage for either MWR or TWR. I am taking the current total value of the position and the amount deposited and subracting the total dividends earned for all time in fund.. and then caluculating a percentage difference between those two number.. I am getting about 5% gain for all time. but the MWR and TWR that wealthfront displays is 13.4% TWR and 9.9% MWR. both of these are vastly higher than the number i am getting. What am i missing or getting wrong?

@wealthfrontvideos Год назад

Hi you're calculating simple return, whereas MWR and TWR are very different. I'd encourage you to email our team for more context.

@petrehushoratiu 5 месяцев назад

How about showing a good ol fashioned “winnings “ number (or percentage)? (Total deposits minus total withdrawals) vs the current value of the account. So I can tell how much I “put in “ and how much I “made”. Very simple math, why is not available in Wealthfront????

@TheReefsFromSMC 4 месяца назад

As a number OK, but as a % it does not work. Imagine you withdraw all your initial investment except for $1, and that day you choose to calculate your "winnings" %, it will be equal to your winnings / $1, and the percentage will be huge and not accurately represent your performance.