What is the difference between time-weighted and money-weighted returns?

Time-weighted returns measure portfolio performance independent of when you add or withdraw money, making it the standard for comparing against benchmarks like the S&P 500. Money-weighted returns account for the timing and size of your contributions, so adding $20,000 right before a market crash will show a lower money-weighted return even if the portfolio strategy itself performed well.

How should I compare my portfolio to a benchmark?

Match your portfolio's asset allocation to an appropriate index — compare a 70/30 stock-bond mix to a blended benchmark, not the pure S&P 500. Over a 3-year period, outperforming the S&P 500 by 1-2% annually is meaningful; consistently underperforming by 2%+ suggests switching to low-cost index funds.

How much does tax drag reduce stock portfolio returns?

Taxable accounts lose 0.5-1.5% annually to taxes on dividends and capital gains, reducing a 10% pre-tax return to 8.5-9.5% after taxes for investors in the 22-24% bracket. Holding investments in tax-advantaged accounts (401k, IRA) or using tax-loss harvesting can recover most of this drag and improve after-tax ROI by 15-20% over a decade.

Stock Portfolio ROI Calculator

Calculate the total and annualized ROI of your stock portfolio. Compare performance against market benchmarks like the S&P 500.

Tracking stock portfolio ROI requires accounting for the initial investment, dividends received, ongoing costs like management fees and commissions, and unrealized capital gains. A $50,000 portfolio that grows to $56,000 in year one with $150 in annual fees and 8% expected growth provides a framework for projecting multi-year returns. The critical benchmark is whether your portfolio outperforms a simple S&P 500 index fund, which has averaged 10.3% annually over the past 30 years.

Initial Investment

Total upfront cost of the investment

Annual Revenue / Return

Expected annual revenue or gain

Annual Ongoing Costs

Recurring annual expenses

Time Period

years

Annual Revenue Growth

Expected annual revenue increase

Total ROI

260.4%

Over 3 years

Net Profit

$131,348

Revenue minus all costs

Annualized ROI

53.3%

Average return per year

Total Cost

$50,450

Initial + ongoing costs

Total Revenue

$181,798

Cumulative returns

Payback Period

10.7 months

Time to recover investment

Year-by-Year Breakdown

Year	Revenue	Cost	Cumulative Profit	Cumulative ROI
1	$56,000	$50,150	$5,850	11.7%
2	$60,480	$150	$66,180	131.6%
3	$65,318	$150	$131,348	260.4%

Key Considerations

A $50,000 portfolio earning $56,000 in first-year returns with $150 in fees delivers a net ROI of 11.5% — slightly above the S&P 500 historical average of 10.3%, suggesting the strategy may be worth continuing.
Fund expense ratios matter enormously over time. A 1% fee on $50,000 costs $500/year initially, but on a $200,000 portfolio after 15 years of growth, that same 1% costs $2,000/year — choose low-cost index funds at 0.03-0.10%.
Dividend reinvestment (DRIP) historically accounts for 40% of total S&P 500 returns. On a $50,000 portfolio yielding 2%, reinvesting the $1,000 annual dividend adds approximately $34,000 in additional value over 20 years at 10% growth.
Tax-loss harvesting can improve after-tax ROI by 0.5-1.5% annually. Selling losing positions to offset gains saves 15-20% of realized losses in tax, which can be reinvested for compounding benefit.
Compare your 3-year total ROI against the S&P 500 for the same period. If the index returned more with zero effort, consider switching to passive index investing and redirecting your research time to higher-ROI activities.

Quick Numbers

Initial investment	$50,000 portfolio value
Annualized return	11.5% net of $150 annual fees
3-year total gain	$18,632 (assuming 8% growth)
vs. inflation (3%)	8.5% real return above inflation
vs. S&P 500 benchmark	+1.2% above 10.3% historical average
Annual fees impact	$150/year (0.3% expense ratio)

How This Compares

An 11.5% annualized stock portfolio return exceeds rental property cash-on-cash returns when measured on a fully passive basis, and far outpaces high-yield savings accounts at 4.5-5.0% APY. However, stocks carry greater short-term volatility — a 20-30% drawdown is possible in any given year — while savings accounts guarantee principal but lose purchasing power to inflation over time.

Frequently Asked Questions

What is the difference between time-weighted and money-weighted returns?: Time-weighted returns measure portfolio performance independent of when you add or withdraw money, making it the standard for comparing against benchmarks like the S&P 500. Money-weighted returns account for the timing and size of your contributions, so adding $20,000 right before a market crash will show a lower money-weighted return even if the portfolio strategy itself performed well.
How should I compare my portfolio to a benchmark?: Match your portfolio's asset allocation to an appropriate index — compare a 70/30 stock-bond mix to a blended benchmark, not the pure S&P 500. Over a 3-year period, outperforming the S&P 500 by 1-2% annually is meaningful; consistently underperforming by 2%+ suggests switching to low-cost index funds.
How much does tax drag reduce stock portfolio returns?: Taxable accounts lose 0.5-1.5% annually to taxes on dividends and capital gains, reducing a 10% pre-tax return to 8.5-9.5% after taxes for investors in the 22-24% bracket. Holding investments in tax-advantaged accounts (401k, IRA) or using tax-loss harvesting can recover most of this drag and improve after-tax ROI by 15-20% over a decade.