Dollar-Weighted Return.

The dollar-weighted return (DWR), also called the money-weighted return, measures the actual return an investor earned on a portfolio by accounting for the size and timing of every cash flow — contributions, withdrawals, and dividends — during the measurement period. Unlike the time-weighted return, which strips out cash flows to isolate the fund manager's skill, the dollar-weighted return reflects the investor's personal experience: it rises when large sums are invested before strong market periods and falls when large contributions arrive just before a downturn. The calculation is equivalent to solving for the internal rate of return on all cash flows in and out of the account. Because the method weights each period's return by the amount of capital at work, a single poorly-timed large deposit can drag the DWR well below the fund's published time-weighted performance. Research consistently shows that actual investor dollar-weighted returns lag published fund returns by one to two percentage points annually, a gap sometimes called the "behavior gap," because investors tend to add money after strong performance and withdraw after losses. For individual investors reviewing their own portfolio, the dollar-weighted return is the honest answer to the question "How did I actually do?" rather than "How did the fund do?" Most brokerage account statements now report personal rates of return that use a dollar-weighted or modified Dietz methodology, making this figure increasingly accessible without manual calculation.