IBKR - What this difference in return means?

Investing / Brokers
1

Hello everyone,

This was my first year investing with IB and I wanted to check my portfolio KPI for 2021.

If I go in the porfolio analyst tool I have quite a big difference according the method of return I chose

  • Time Weighted Return : 14.18%
  • Money Weighted Return : 1.07%

PFANTWRscreen
PFANMWRscreen

I am not exactly sure what it means, from what I understand I my real return is 1.07% and the difference is due that I had a bad timing (I started investing significant amount mostly in the last quarter). Is that correct ? How would you interpret it ?

Also, If I go in the activity statement, everyting is calculated using Time Weighted Retrun, is it possible to change the report to MWR ?

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2

Time weighted and money weighted returns are different methods to measure your performance. In short, money weighted return incorporates in-/outflows of cash into the portfolio.

Here’s a more detailed explanation including a comparison between TWR and MWR.

3

I had read this article, so this is what I thought, If I understand correctly my real return is 1.07% and the difference is due that I deposited higher amounts at bad times ? I didn’t get 14.18% return, but 1.07% in reality.

4

There’s no such thing as “real return”, it’s different ways to look at your returns.

TWR is used to compare returns of a portfolio/security with another portfolio/security, because it is unaffected by cash flows. That’s also why investment managers show TWR to their clients, because they have no control over the flows of the client.

If MWR < TWR, indeed means that you made bad choices when to withdraw/contribute money into the portfolio. It means that you had a large portfolio when the performance was bad and/or a smaller portfolio when the performance was good.

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5

TWR is how good you are as a “fonds manager”. i.e. if you had all your money already when you started.

MWR is your actual return, considering cash in- and outflow.

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