In your portfolio, there are several key metrics to describe your returns. Three of the most important are:
Simple Return
TTWROR (Time-Weighted Rate of Return)
IRR (Internal Rate of Return)
Each metric answers a different question about your investments.
Simple Return
The simple return shows how much profit or loss you made relative to your invested capital:
Simple Return = ((Ending Value−Invested Capital) / Invested Capital)
Advantage: Quick and easy to understand.
Disadvantage: It does not consider when you invested your money or if there were additional deposits or withdrawals.
TTWROR (Time-Weighted Rate of Return)
The TTWROR measures the return of your portfolio independent of deposits or withdrawals, based solely on the performance of the assets themselves.
Advantage: Ideal to see the pure performance of your investments.
Disadvantage: It does not reflect how your deposits grew over time.
IRR / Internal Rate of Return
The IRR takes all cash flows and their timing into account. It shows how effectively your capital actually grew over time.
Advantage: Very informative for your personal return.
Disadvantage: Slightly more complex to calculate and only visible for Premium and Wealth customers.
Example: Difference Between Metrics
Scenario:
January: You invest €1,000
July: You invest another €1,000
December: Portfolio value = €2,200
Metric | Calculation | Result |
Simple Return | (2,200 − 2,000) / 2,000 | +10 % |
TTWROR | Return of assets independent of cash flows | approx. +20 % (since the first €1,000 grew longer) |
IRR | Considers timing of deposits | approx. +13 % |
Interpretation:
The simple return shows that overall, you earned 10 % on your invested capital.
The TTWROR shows the performance of your assets themselves, without influence from additional deposits.
The IRR shows how efficiently your money actually grew over time, including all deposits.