How Portfolio Returns Are Calculated
Learn how Luum calculates time-weighted returns, handles cash flows, and compares your performance to a benchmark.
Luum uses the time-weighted return (TWR) method to measure portfolio performance. This article explains what that means, why it matters, and how benchmark comparison works.
Time-weighted return (TWR)
TWR measures how well your investments performed independently of when you added or withdrew money. It does this by breaking your portfolio history into sub-periods every time a cash flow occurs (a deposit, withdrawal, or new contribution), computing the return for each sub-period, then geometrically linking them together.
This is the industry-standard method for evaluating portfolio performance because it isolates investment returns from the timing of capital flows. If you deposited a large sum the day before the market dropped, TWR still reflects how your holdings performed — the timing of your deposit does not distort the return figure.
Money-weighted return (MWR)
MWR (also called internal rate of return, or IRR) is the return that accounts for when you invested your money. It rewards good timing and penalises bad timing. Luum displays MWR on individual position detail views so you can see how the timing of your specific purchases has affected your personal outcome.
Return periods
Returns are shown over these standard periods:
- 1M — last 30 calendar days
- 3M — last 90 calendar days
- YTD — January 1 of the current year to today
- 1Y — last 365 calendar days
Periods with less than the required days of data are hidden until sufficient history is available after your brokerage first connects.
Benchmark comparison
Luum compares your portfolio's TWR to a benchmark index over the same period. The default benchmark is the S&P/TSX Composite for Canadian portfolios and the S&P 500 for US portfolios. You can change the benchmark in Portfolio Settings → Benchmark.
Benchmark data is sourced from EODHD and updated nightly. Returns shown are price returns (not total return including dividends), which is consistent with how most portfolio analytics platforms report benchmark performance.
Currency effects
If your portfolio holds US-listed securities and your reporting currency is CAD (or vice versa), foreign-exchange movements will affect your displayed return. Luum converts all positions to your reporting currency at the current spot rate when calculating returns. This means a weakening CAD will boost the reported return of US holdings and vice versa — this is the actual economic effect you experienced, not a display artefact.
Unrealised vs. realised gains
The return figures on your dashboard reflect total return including both unrealised (open positions) and realised (closed positions) gains and losses within the period. Dividends received are included. Tax is not deducted — returns shown are pre-tax.