Modified Dietz Method
The Modified Dietz method estimates period return by weighting each external cash flow according to how long it was invested during the period.
Portfolio-return methods for income, annualization, external cash flows, investor experience, and manager comparison.
Return measurement begins by defining the question. Rate of Return and Return on Investment explain basic gain, income, cost, and period conventions when external cash flows are absent or secondary.
When contributions and withdrawals matter, Time-Weighted Rate of Return isolates strategy performance by linking subperiod returns, while Money-Weighted Rate of Return measures the annualized result earned by dated investor cash flows.
The Modified Dietz Method estimates period return using time-weighted cash flows when valuation at each flow is unavailable. Every comparison should align period, currency, fee treatment, tax basis, valuation timing, and benchmark before interpreting performance.
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The Modified Dietz method estimates period return by weighting each external cash flow according to how long it was invested during the period.
Money-weighted rate of return is the internal rate of return earned by dated portfolio cash flows, including their timing and size.
Rate of return measures an investment's gain or loss relative to invested capital over a stated period and calculation basis.
Return on investment compares net benefit with a stated investment-cost base, providing a simple profitability ratio that omits timing and risk.
Time-weighted return geometrically links portfolio subperiod returns to neutralize the effect of external contribution and withdrawal timing.