What’s the Best Way to Measure Investment Performance?

In tracking how your investments are doing, there are several ways to measure performance, but they don’t all tell the same story:

Simple Average ReturnCAGR (Compound Annual Growth Rate)TWR (Time-Weighted Return)IRR (Internal Rate of Return / Dollar-Weighted Return)

Each method offers something different depending on the context, lump sum vs. ongoing contributions, investor vs. fund manager perspective, etc.

1. Which return metric do you personally rely on most and why (IRR, CAGR, etc.)?

2. Do you think most people understand the difference between simple average and CAGR — or do you think this is an overlooked source of confusion?

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