GlossaryAdvanced
Dollar-Weighted Return
A return measure that accounts for the timing and size of each individual deposit.
Dollar-weighted return measures an investor's actual realized return, accounting for the specific timing and size of each deposit and withdrawal they made — distinct from a time-weighted return, which measures an underlying investment's performance independent of when funds were added or removed.
This distinction matters because a portfolio's dollar-weighted return can differ meaningfully from its underlying assets' overall performance if an investor added or removed funds at different points along the way.
Examples
- An investor who added funds right before a decline will have a lower dollar-weighted return than the asset's own performance alone would suggest.
- Dollar-weighted return reflects an individual investor's actual experience, not just the asset's raw performance.