What are your time-weighted returns?

Your time-weighted returns show how your investments have performed over the time you’ve held them without being skewed by recent contributions and withdrawals.

How are your time-weighted returns calculated?

Time-weighted returns take into account how long you have held your investments and the point at which any contributions and withdrawals have been made. We use a method called Modified Dietz to apportion changes in the value of your investments (includes any LISA bonuses or rewards where applicable) across the lifetime of your investments. You don’t need to worry about doing this calculation yourself as we do it for you in-app, but here’s an example of how it works.

Let’s say you contributed £100 at the start of the year. 12 months pass and you’ve earned £5, so you decide to contribute an additional £1,000.

The time-weighted return calculation assumes that the £5 was earned from the £100 contribution made a year ago, rather than the £1,000 contribution you made recently. So, in this example your simple return is 0.45% (calculated by dividing £5 by £1,100), but your time-weighted return is 5% (calculated by dividing £5 by £100) as it isn’t skewed by the £1,000 contribution.

At Moneybox, we know that a lot of our customers make regular deposits, but also need to withdraw from time to time. That’s why your time-weighted return is a useful way to see how well your investments have performed without being skewed by recent contributions and withdrawals.

Lifetime time-weighted return vs annualised time-weighted return

In addition to your lifetime time-weighted return, we also display your annualised time-weighted return if you first contributed into your account more than 12 months ago. This enables you to compare your returns to other returns that are typically expressed as annual percentages.

For example, an annualised time-weighted return can be compared to the annual equivalent rate (AER), which is the interest rate offered by a savings account.

So, if you made the same contributions and withdrawals into both your investment and savings accounts, you’d be able to directly compare the returns by comparing the interest rate on your savings account to the annualised time-weighted return on your investing account.