TWR and XIRR

[guppywei]

Hi everyone,

1. May I know what is the difference between TWR and XIRR? I went to google them and after reading a few articles, I still do not quite understand.
2. Does XIRR represent the yearly returns of your portfolio (i.e. diff betw 31 Dec and 1 Jan in a year)?
3. Do you personally use TWR or XIRR to gauge your portfolio returns?

Thanks!
Jiawei

[evankoh]

Hi Jiawei,

@guppywei

May I know what is the difference between TWR and XIRR? I went to google them and after reading a few articles, I still do not quite understand.

TWR ignores the size of your portfolio at different time whereas XIRR considers the size of your portfolio at different time.

@guppywei

Does XIRR represent the yearly returns of your portfolio (i.e. diff betw 31 Dec and 1 Jan in a year)?

Yes, XIRR is by definition annualized. So, it is an annualized return.

@guppywei

Do you personally use TWR or XIRR to gauge your portfolio returns?

Personally, I use XIRR to see how much I have grew (or lost) my portfolio on an annualized basis

TWR would be more suitable to compare against benchmark or others’ portfolio.

Cheers,
Evan