Which is better TWRR or MWRR and why

Question

Accepted Answer

TWRR is better for measuring the performance of a portfolio over time, while MWRR is better for comparing the performance of different portfolios.

TWRR (Time-Weighted Rate of Return) is better for evaluating the performance of a portfolio over time as it eliminates the impact of external cash flows.
MWRR (Money-Weighted Rate of Return) is better for comparing the performance of different portfolios or investment options as it considers the timing and amount of cash flows.
TWRR is more suitable for long-term investors who are concerned with the overall performance of their portfolio, while MWRR is more useful for short-term investors who frequently make deposits or withdrawals.
For example, if an investor wants to know how well their portfolio has performed over the past year without the influence of their deposits or withdrawals, TWRR would be the better choice.
On the other hand, if an investor wants to compare the performance of two different investment options taking into account their cash flows, MWRR would be more appropriate.

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