In money weighted return, what do we do if dividend is reinvested in the account? Is that considered cash inflow to the account? I know if it is not reinvested, that’s a cash outflow. Does reinvesting or not reinvesting also affect time weighted return?
Good question. I was going to post something along these lines. Im finding it difficult to figure out what cash flows to us for the MWR… Hope someone can share any insight - tips/tricks Thanks
- Its a cash inflow+cash outflow of the same amount, so net result will be no cash flows in those periods, but it will increase the value of your holdings so you’ll have bigger cash inflow when finally sell the shares. 2. It can’t affect the time weighted return - TWR is simply the average return on the stock + dividend yield without taking into account your cash management decisions.
Beatnik Wrote: ------------------------------------------------------- > 1. Its a cash inflow+cash outflow of the same > amount, so net result will be no cash flows in > those periods, but it will increase the value of > your holdings so you’ll have bigger cash inflow > when finally sell the shares. > 2. It can’t affect the time weighted return - TWR > is simply the average return on the stock + > dividend yield without taking into account your > cash management decisions. Thanks you so much Beatnik…that helps…