### Time-Weighted Return (TWR) vs. Internal Rate of Return (IRR)

##### What was your average annual return?  Was it 1.5% (which is in the middle of 1% and 2%) or was it closer to 2% since you had more money invested and a larger gain in year 2?

Spoiler: TWR has an average of approx 1.5% (in the middle of the 1% and 2%) since it does not look at how much you had invested, while IRR is higher since you had more money invested when the return was 2%.

### Wrapping It Up: Which One Should I Use, the IRR or TWR?

##### * These two will diverge when there are large flows (impacts both) or large price swings (impacts TWR only).

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