We use the method of "Net Return" and "Time Weighted Return" to calculate the gain on your portfolio.
It can be difficult to determine how much money was earned on a portfolio when there are multiple deposits and withdrawals made over time. If we simply subtract the beginning balance from the ending balance, we simply get the net return.
However, in the financial world, the percentual Time Weighted Return is often used to ensure the comparability of multiple financial investments. This method reflects both the rate of return on the initial investment and any proportional return on deposits or withdrawals during the time invested.
Why might there be a difference in the net return and Time Weighted Return?
When using Time Weighted Return, it might occur, that the net return is negative, while the Time Weighted Return is positive. For example: if you had a good return in percentage on a small investment, both (net return and Time Weighted Return) are positive. But if you then transfer a large reinvestment in the next month which has a negative performance on the market, it will impact the net return much more than the Time Weighted Return.