The Weighted Average Return is the aggregate return of a portfolio, calculated by multiplying the return of each asset by its weight (percentage of total capital) in the portfolio.
Unlike a simple average, which treats a $100 position the same as a $100,000 position, the weighted average respects the financial reality of your allocation. It answers the question: "How did my actual money perform?"
The Math: Contribution to Return
Investment professionals use a concept called "Contribution to Return" (CTR). This is the specific slice of performance that a single asset adds to the whole.
Bond Fund: 80% Weight × 2% Return = +1.6% contribution.
Total Portfolio Return: 10.0% + 1.6% = 11.6%.
Notice how the "boring" bond fund diluted the high-flying tech stock. This is the mechanism of diversification in action.
The Impact of Asset Allocation
Asset allocation—the weights you choose—is widely considered the primary driver of long-term investment returns, explaining over 90% of a portfolio's variance.
Strategy Tip: If you have high conviction in a trade, sizing it too small (e.g., 1% weight) means even a 100% gain only adds 1% to your year. "Sizing ensures your winners matter."
Rebalancing & Weight Drift
Market movements naturally change your weights. This is called "Drift."
The Problem: Winners grow to become a larger % of the pie, increasing risk. Losers shrink, reducing their potential rebound impact.
The Fix: Rebalancing involves selling some of the overweight assets (selling high) and buying underweight assets (buying low) to restore your target weights.
Benchmarking Your Performance
Once you calculate your weighted return, compare it to a relevant benchmark.
US Stocks: S&P 500 (SPY)
Global Stocks: MSCI World (VT)
Bonds: US Aggregate Bond (AGG)
Did short-term trading beat the "lazy" benchmark? The weighted average tells the truth.
Frequently Asked Questions
Detailed answers about weighted returns
Does this include dividends?
To get an accurate "Total Return," you must include dividends in the individual asset return percentage. If a stock rose 8% and paid 2% dividend, input 10% as the return.
How do I handle cash drag?
Cash is a position! If 20% of your portfolio is in cash earning 0%, input it as: Weight 20%, Return 0%. This will rightfully lower your total portfolio return, illustrating "cash drag" in a rising market.
What if my weights don't sum to 100%?
If they sum to less than 100%, you are missing data (or cash). If they sum to 120%, you are using leverage (margin). The calculator will still do the math, but the result implies a leveraged return.
How does this differ from Time-Weighted Return (TWR)?
Weighted Average is a snapshot of current holdings. TWR links returns over time periods to eliminate the effect of deposits/withdrawals. Fund managers use TWR; this calculator is better for "Attribution Analysis" of a static allocation.
Can I use this for short positions?
Yes. But the math can get tricky. Usually, you treat the short exposure weight as positive (it uses capital) but the return depends on price drop. If you shorted $10k and it made 5%, input Weight X%, Return +5%.
Is high concentration bad?
Concentration (high weights in few assets) increases variance. It allows for massive outperformance but also massive underperformance. Diversification (low weights in many assets) "smooths" the weighted return towards the market average.
How often should I calculate this?
Calculate it whenever you are considering a rebalance, typically quarterly or annually. Checking it daily is usually noise.
What about negative returns?
Negative asset returns simple subtract from the total. A -20% return on a 50% weighted asset drags the whole portfolio down by -10%. This highlights why "risk management" (avoiding large losses) is mathematically potent.
Summary
The Weighted Average Return Calculator breaks down portfolio performance by asset contribution.
It highlights the critical importance of position sizing—your weights matter as much as your picks.
Use it to analyze "Contribution to Return" and spot which assets are driving (or dragging) your results.
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Combine multiple asset returns by portfolio weights.
How to use Weighted Average Return Calculator
Step-by-step guide to using the Weighted Average Return Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Weighted Average Return Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Weighted Average Return Calculator is designed to be user-friendly and provide instant calculations.
Is the Weighted Average Return Calculator free to use?
Yes, the Weighted Average Return Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Weighted Average Return Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Weighted Average Return Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.