| Time-Weighted Rate of Return |
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A measure of the compound rate of growth of a portfolio. It is normally used
to compare the return of investment manager because the method eliminates the distorting effects of the inflows of new money.
When calculating, the effect of varying cash inflows is eliminated by assuming a single investment at the beginning of a period and measuring the growth or loss of market value to the end of
the period.
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It is assumed all cash distributions are reinvested in the portfolio
and the exact same periods are used for comparisons.
Also called the "geometric mean return" as the reinvestment is captured by using the geometric total and mean rather than the arithmetic total and mean. |
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