Suppose we have a portfolio with many assets.

Since this portfolio receives monthly contributions and withdrawals, what is the best method to evaluate its global rate of return and avoid computing these contributions as a "profit" and withdrawals as "losses"?

I've already seen some people using abstract entities (e.g.: we may define that we start with 100 entities, and, for a \$100 portfolio, each entity would cost \$1), but I don't know the name of this method in English.

  • 1
    $\begingroup$ I think you are probably referring to the "NAV per unit" method of computing Time Weighted Returns. ("units" = what you call "entities"). It is the method used by US Mutual Funds, but is difficult to find clear explanations. I made an attempt here quant.stackexchange.com/questions/44594/… $\endgroup$
    – nbbo2
    Aug 12, 2020 at 21:50
  • 2
    $\begingroup$ Another even better article is here quant.stackexchange.com/questions/55466/… where the same method is dicussed for partnership accounting $\endgroup$
    – nbbo2
    Aug 12, 2020 at 21:55
  • $\begingroup$ That's exactly what I was looking for! Thank you @noob2 $\endgroup$ Aug 13, 2020 at 0:24
  • $\begingroup$ vote if you found anyone's comments or answers useful $\endgroup$
    – develarist
    Aug 13, 2020 at 23:16

1 Answer 1


Usually this would be evaluated using an internal rate of return, the rate $r$ which makes the PV of inflows and outflows equal -- assuming a starting inflow of portfolio value at the start date and an outflow as though the portfolio were liquidated at the end date.


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