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Returns Definitions (TWR and XIRR)

The main focus of this page is to understand how the terms are used in StocksCafe.

Definitions are extremely simplified so as to make explanations easier. For a detailed explanation of what investment terms mean, there are many resources out there, some of which we will link below.

Time-Weighted Rate of Return (TWR)

TWR measures the growth of your portfolio over a time period, ignoring the size of your portfolio.

Below is an example TWR portfolio report (you can find your own on this page).

Example TWR portfolio report

Example: Year 2018

Looking at 2018, it shows that the portfolio grew by 4.15% that year (Jan 1 to Dec 31). This means if the portfolio totaled $100 on Jan 1, it totaled $104.15 on Dec 31.

Compare this with the ES3 benchmark, which saw a -7.43% decrease. i.e. If the portfolio only has ES3, a portfolio total of $100 on Jan 1 would total $92.57 on Dec 31.


Overall TWR = [(1 + Year_1_TWR) x (1 + Year_2_TWR) x .. x (1 + Year_N_TWR)] – 1


All dividends and fees are included in TWR calculations.


Investopedia’s article on TWR (link)

Extended Internal Rate of Return (XIRR)

While TWR is weighted on time, XIRR is weighted on money. This means that any money deposited or withdrawn from the portfolio will have an impact.

Below is an example of a XIRR portfolio report (you can find your own on this page).

YearXIRRCapital Flow
2016-17.56%SGD 59,150
201734.04%SGD 36,957
20185.32%SGD 28,276
201928.30%SGD -9,858
20203.46%SGD -7,506.57
2021-13.15%SGD -1,151.28
Overall14.61%SGD 105,867.15
Example XIRR portfolio report

Example: Year 2018

The portfolio’s XIRR for 2018 is 5.32%. This means if the portfolio totaled $100 on Jan 1, it totaled $105.32 on Dec 31.

It is worth noting that XIRR is annualized, which means that even if the portfolio above started trading in 2016 July, -17.56% is extrapolated to cover the entire of year 2016.

Capital flow

This is simply the total amount of money that is deposited or withdrawn from the portfolio. Note that dividends are considered as money withdrawn. In the year 2018, the net is $28,276 deposited to the portfolio.


Overall XIRR is unlike TWR which can be derived from its yearly value because it considers the size of portfolio.


Read more about XIRR (link)

Can TWR be positive while XIRR is negative (and vice versa)?

This is a common question, and the answer is yes.

Here is an example to illustrate:

YearPortfolio on 1 JanPortfolio on 31 DecTWRXIRR
(deposited $890 into portfolio)

The reason goes back to them being weighted differently. TWR ignores how much money you have (since it is weighted on time), whereby XIRR takes into account how much you have (as it is weighted on money).

Generally speaking, TWR and XIRR won’t differ too much, unless you have big changes (i.e. capital inflow / outflow) to your portfolio.

Updated on 23 April 2021

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