Building Freetrade

Money-weighted rate of return

Sam Poullain

September 10, 2020

Sam Poullain

More ways to measure your portfolio performance

Starting today, we’re rolling out a brand new feature to give you a measure of how your portfolio has performed.

The goal of the money-weighted rate of return (MWRR) is to show you the performance of your investment portfolio in a way that includes the impact created by your cash funding and withdrawal.

This way, MWRR represents your actual experience. It shows you how much your portfolio has increased or decreased in value when taking into account the amount of cash you have deposited and withdrawn from your account.

This is in contrast to time-weighted rate of return (TWRR), which doesn’t take into account your deposits and withdrawals. We’re working to bring TWRR to your app, too.

An example of the money-weighted rate of return

Imagine you deposit £1,000 into your Freetrade account and invest it in Apple shares. One year later, those Apple shares are worth £1,100.

Things get trickier when you start making deposits or withdrawals.

For example, if you deposit and invest £1,000 at the start of a year, another £500 nine months later and then sell your investments six months after that when they’re worth £1,600, then by what percentage have your investments actually grown in value?

This is what the MWRR tells you.

Read more about MWRR, including how it’s calculated on the Investing Dictionary.

Where can I see this feature?

You’ll see it pop up on the Insights tab of your app, once we get to your account as part of the phased rollout that has started today.

And stay tuned for more improvements coming to your app.

Join the discussion on the forum and let us know what you think of the feature!

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

The views expressed above are those of community members and do not reflect the views of Freetrade. It is not investment advice and we always encourage you to do your own research.

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