Portfolio return: How we calculate
Calculate return from dated cash flows (XIRR), plus linked subperiod returns (TWR) when portfolio valuations are available.
How we calculate
The internal return on dated cash flows (XIRR) finds an annual discount rate at which their present values sum to zero. Time-weighted return (TWR) links results of subperiods separated by external flows. Neither is a simple average or a guaranteed result. Enter contributions as negative and withdrawals or final value as positive. XIRR uses actual dates and a 365-day year. TWR links subperiod returns and needs portfolio values around external flows. TWR uses the opposite cash-flow perspective: contributions to the portfolio are positive and withdrawals negative. The model places external flows at period end; subperiod return = (closing value − external flow) / opening value − 1.
What the figures mean
- Annual return using actual dates (XIRR)
The return uses the amounts and actual dates of investments and payouts. It is annualised on a 365-day basis, not a simple average of percentages.
Simple example: €100 invested on 01.01.2025 and €120 received on 01.01.2026 give 20% a year.
- Return excluding external contribution effects (TWR)
Subperiod returns are compounded while contributions and withdrawals are separated from investment gains. This helps assess the portfolio itself rather than the amount added.
Simple example: A gain of 10% followed by a loss of 10% gives 1.10 × 0.90 − 1 = −1%, not 0%.
Worked example
Example: an outflow of €10,000 on 01.01.2025 and an inflow of €12,000 on 01.01.2026 are 365 days apart, giving XIRR of 20%. An extra contribution halfway through needs its own date and signed row; merely dividing 12,000 by 10,000 would misstate the return.
XIRR depends on all external cash flow dates and signs. Multiple sign changes can yield multiple mathematical roots; the calculator selects one under its procedure. TWR requires portfolio values around each external flow.