When it comes to tracking your investment success, not all returns are created equal. The Money-Weighted Rate of Return (MWRR) is a crucial but often overlooked metric that paints a true picture of your portfolio’s growth by factoring in the timing and size of your cash flows. As Australia’s investment landscape shifts in 2025, understanding MWRR could be the edge you need to make sharper financial decisions.
The Money-Weighted Rate of Return (sometimes called the internal rate of return, or IRR) is a calculation that measures the actual performance of an investment portfolio, taking into account all deposits and withdrawals. Unlike the Time-Weighted Rate of Return (TWRR), which strips out the impact of cash flows, MWRR shows how your specific decisions about when—and how much—to invest or withdraw have influenced your overall returns.
For example, if you added a large lump sum just before a market downturn, your MWRR will reflect the impact of that timing, for better or worse. In contrast, TWRR would ignore the effect of your cash flow decisions, presenting a more ‘market-neutral’ view.
In 2025, Australian investors are navigating an environment shaped by:
These factors mean that cash flows—when you add or withdraw money—have a much greater impact on your portfolio outcome. For instance, the government’s 2025 superannuation policy now allows larger catch-up contributions for those over 55, and early access rules for certain medical or hardship cases have been expanded. If you take advantage of these, your personal returns will differ significantly from the headline performance of the market or your fund manager.
MWRR is especially relevant if you:
Calculating MWRR isn’t as simple as plugging numbers into a standard returns formula. It involves finding the discount rate that sets the net present value (NPV) of all your cash flows—including your starting investment, additional deposits, withdrawals, and the final balance—to zero. In practice, most Australians rely on superannuation portals, online calculators, or spreadsheet tools like Excel’s =XIRR() function to crunch the numbers.
Let’s see a real-world scenario:
If she simply compared her start and end balances, she might think she earned a 16% return. But the MWRR, which accounts for the $10,000 deposit (which lost value in the correction) and the $5,000 withdrawal, would show a more modest—and accurate—performance figure, perhaps around 7%.
Key points to remember about MWRR:
Both metrics have their place in an investor’s toolkit. Fund managers often report TWRR because it shows how their investment strategy performs, regardless of investor behaviour. But for individual Australians—especially those managing their own SMSFs or actively contributing to super—MWRR is the better gauge of personal success.
In 2025, with more Australians using micro-investing apps, flexible super contributions, and even crypto platforms, the gap between MWRR and TWRR can be significant. If you want to know how your choices have paid off, MWRR is the number to watch.
The Money-Weighted Rate of Return is more than just a technical measure—it’s your personal investment report card. As Australia’s financial landscape evolves in 2025, understanding how your contributions and withdrawals shape your returns will help you make smarter, more informed decisions. Whether you’re a seasoned investor or just starting out, tracking your MWRR can give you clearer insights and a greater sense of control over your financial future.