Return refers to the financial return generated by an investment in relation to the capital invested. It indicates how much profit or income was generated in relation to the amount originally invested. The return is a key figure for assessing the profitability of an investment and measuring the success of an investment. A higher return indicates better financial performance, while a lower return may indicate lower profitability. The rate of return is usually expressed as a percentage or as an absolute value and can be calculated for both short-term and long-term investments. Investors use yield to compare the performance of different investments and make informed decisions about their investment strategy.

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The most important types of return at wealth management are time-weighted and money-weighted return ratios.

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The time-weighted return is a method of calculating the average annual return on an investment, irrespective of the amounts paid in or redeemed. It takes into account the performance of the portfolio over certain periods of time and enables an objective comparison of the performance of different investments. The time-weighted return is particularly relevant for investors who make few or small deposits and withdrawals during the investment period.

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The money-weighted return, on the other hand, takes into account the actual deposits and withdrawals of funds over time. It measures the return achieved on the amounts actually invested. The money-weighted return is particularly important for investors who make large deposits and withdrawals during the investment period.

In summary, both methods offer different insights into the performance of an investment or a portfolio and can be relevant depending on the investment strategy and investment behavior. The time-weighted return allows investors to compare the performance of different investments regardless of the amounts paid in. The money-weighted return, on the other hand, takes into account the actual deposits and withdrawals and shows the return achieved on the amounts invested. Depending on the investment strategy and investment behavior, choosing the right return method can be crucial to making a well-founded assessment of the performance of an investment or portfolio.

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