Dollar-weighted return
InvestingDefinition
Internal rate of return on a portfolio that incorporates the timing of contributions and withdrawals. Different from time-weighted return (the standard fund-performance measure that ignores cash flow timing).
Dollar-weighted captures real investor experience including the cost of bad timing. Studies consistently show dollar-weighted < time-weighted for individual investors — the "behavior gap."
Dollar-weighted captures real investor experience including the cost of bad timing. Studies consistently show dollar-weighted < time-weighted for individual investors — the "behavior gap."