Multiply each holding's return by its share of portfolio value, then add. Formula, worked example, contributions, asset classes and the measures it is not.
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Three holdings returned 14.5%, 3.2% and −6.8% last year. Average those and you get 3.63%. The portfolio actually returned 8.33%, and the gap is not a rounding issue.
It is position size. Fifty-six cents of every dollar sat in the holding that gained 14.5%, and only twelve cents sat in the one that lost. A simple average pretends you split the money evenly, which almost nobody does.
This guide covers portfolio weights, the return formula, contributions, gains against losses, mixed asset classes, and the two return measures this one is constantly confused with. The weighted average calculator and the VWAP calculator handle the arithmetic, and how to calculate a weighted average covers the general method.
A weighted average portfolio return multiplies each holding’s return by its share of total portfolio value, then adds the results. It reports what your money earned rather than what the average investment earned.
A holding influences your return in proportion to how much of it you own. A brilliant 40% gain on a tiny position barely registers.
A portfolio weight is one holding’s market value divided by total portfolio value. Our $84,000 equity position in a $150,000 portfolio carries a 56% weight.
Because you cannot spend percentages. The $18,000 REIT losing 6.8% cost $1,224, while the equity position gaining 14.5% made $12,180.
Add every holding’s market value to get the portfolio total, then divide each holding by that total. Express the results as percentages or decimals, and confirm they sum to 100%.
Add current market values, not what you paid. $84,000 plus $48,000 plus $18,000 gives $150,000.
Divide each value by the total. $84,000 divided by $150,000 gives 0.56, or 56%.
Both work, provided you stay consistent. Decimals multiply straight into returns, which is why most spreadsheets use them.
56 plus 32 plus 12 gives exactly 100. A total of 94% means a holding is missing from your data.
Portfolio return equals the sum of each weight multiplied by its return. Written out, that is (w₁ × r₁) + (w₂ × r₂) + (w₃ × r₃), where the weights are decimals summing to 1.
Rp = (w1 × r1) + (w2 × r2) + … + (wn × rn)
The share of portfolio value held in that investment, written as a decimal between 0 and 1.
That holding’s percentage return over the period, positive or negative, measured over the same window as every other holding.
The single figure describing the whole portfolio. It always lands between your best and worst holding return, never outside.
List each investment, work out its weight from market value, find its return, multiply the two, and add the contributions. The sum is your portfolio return, with no further division required.
One row per holding, with its current market value. Cash counts as a holding, and leaving it out is a common first error.
Divide each value by the portfolio total. Never type weights from memory, because they drift as prices move.
Use the same period for every holding. Mixing a year-to-date figure with a twelve-month one produces a number that means nothing.
0.56 times 14.5 gives 8.12. That product is the holding’s contribution, and it carries its own sign.
Add all contributions, respecting negatives. 8.12 plus 1.02 minus 0.82 gives 8.32.
Averaging 14.5, 3.2 and −6.8 gives 3.63%. The real return is 8.33%, because 56 cents of every dollar sits in the holding that gained 14.5%.
Because the weights already sum to 1, the sum of contributions is the answer. No extra division, as the weighted mean calculator shows when weights are normalised.
An $84,000 equity ETF up 14.5%, a $48,000 bond fund up 3.2% and an $18,000 REIT down 6.8% produce a weighted portfolio return of 8.33% on $150,000, against a simple average of 3.63%.
| Holding | Value | Weight | Return | Contribution |
|---|---|---|---|---|
| Global equity ETF | $84,000 | 56% | +14.5% | +8.12 |
| Corporate bond fund | $48,000 | 32% | +3.2% | +1.02 |
| REIT holding | $18,000 | 12% | −6.8% | −0.82 |
| Portfolio | $150,000 | 100% | — | +8.33 |
84 over 150 gives 56%. 48 over 150 gives 32%. 18 over 150 gives 12%.
Multiply weight by return on every row. The REIT contributes −0.816, which rounds to −0.82.
8.120 + 1.024 − 0.816 = 8.33%
That 8.33% equals $12,492 of gain on $150,000, which is the cross-check worth running every time. Dollars never lie about weights.
A return contribution is one holding’s weight multiplied by its return. Contributions add to the portfolio return exactly, which makes them the cleanest way to see which holding actually drove performance.
The portion of portfolio return supplied by one holding. Our equity ETF contributed 8.12 of the 8.33 total.
A 12% position moves the needle by roughly a tenth of its own return. The REIT fell 6.8% and cost the portfolio 0.82 points.
Rank by contribution, never by return. A modest gain on a large position routinely beats a spectacular one on a small position.
Negative returns enter the formula unchanged. Multiply the loss by its weight and add the negative contribution. Nothing about the method changes, and no absolute values belong anywhere near it.
Positive contributions add straight in. 0.32 times 3.2 gives 1.024.
Keep the minus sign through the multiplication. 0.12 times −6.8 gives −0.816, not 0.816.
A loss hurts in proportion to its weight. The same −6.8% at a 40% weight would have cost 2.72 points instead of 0.82.
Add everything in one pass. Spreadsheets handle signs correctly, which the Excel and Google Sheets guide covers with SUMPRODUCT.
Asset classes change nothing. Stocks, bonds, cash and funds all enter the same formula, weighted by market value. A five-class portfolio returning 7.72% uses identical arithmetic to a three-holding one.
Usually the largest weight and the largest swing. At 42% of a $200,000 portfolio, our stocks contributed 6.09 of the 7.72 total.
Lower returns, often substantial weights. Bonds at 24% contributed 0.77, more than the balanced fund despite a far smaller return.
Cash is a holding with a real return, not a gap in the data. At 15% earning 4.8%, it contributed 0.72 points.
Use the fund’s own total return figure. The fund has already weighted its internal holdings, so you weight the fund as a single line.
The five contributions add to 7.72%, the portfolio return. Stocks alone supplied 6.09 of it.
A simple average treats every holding as the same size. A weighted average sizes each by its share of your money. On our portfolio they differ by 4.70 percentage points, and only one describes an account that exists.
It answers the question “what did the average investment do?” Nobody owns the average investment.
Weights redistribute influence, not returns. Our equity ETF moves from one third of the answer to fifty-six percent of it.
3.63% against 8.33%. The full comparison of the two methods appears in weighted average vs simple average.
When the positions genuinely are equal, or when you deliberately want to measure typical holding performance rather than portfolio performance.
An equally weighted portfolio holds the same dollar amount in every position. Its weighted average return collapses into the simple average exactly, because every weight is identical.
Every holding carries the same value. Three holdings mean three weights of 33.3%, rebalanced periodically to stay that way.
The shared weight factors out of every term. Multiply three returns by 0.333 and add, and you have divided by three.
Whenever the weights match. $50,000 in each of our three holdings would have returned 3.63%, exactly the simple average, as what a weighted average is explains more broadly.
A fully invested portfolio’s weights normally sum to 100%. If only part of the portfolio is represented, the calculation must make clear whether the missing allocation is intentionally excluded or should be included.
Because weights are shares of one portfolio. Anything less means a position is missing from the data, not from the account.
The four known holdings contributed 6.996 points. Dividing by the full portfolio treats the missing cash as if it earned nothing, which understates the result unless the cash really did earn zero.
6.996 ÷ 1.00 = 7.00% Whichever you publish, say which one it is. An unlabelled 7.00% and an unlabelled 8.23% look equally authoritative on a slide.
Divide each contribution by the weight actually covered. Our 6.996 points over 0.85 gives 8.23%, the return on the visible portion only.
Reporting 7.00% implies the missing 15% earned nothing. Reporting 8.23% implies it does not exist. Label whichever you publish, because both look equally confident on a slide.
Weighted average return measures allocation over one period. Time-weighted return strips out your deposits to judge investment performance. Money-weighted return includes them to judge your own timing. They answer different questions.
What did my portfolio return over one period, given how the money was allocated?
8.33% on our three holdings
How well did the investments perform, stripping out the effect of cash going in or out?
The industry standard for comparing managers
What return did my actual money earn, including when I added or removed it?
Also called the internal rate of return, or IRR
Best for a snapshot period with no cash moving in or out. It tells you what your allocation produced.
Breaks the period at every cash flow and chains the sub-period returns. The CFA Institute’s performance standards build on it for exactly that reason.
The internal rate of return across all cash flows. It rewards or punishes your timing, which is sometimes the point and sometimes deeply unhelpful.
Seven mistakes cause most wrong portfolio returns: equal weighting, wrong portfolio value, stale weights, dropped negatives, percentage confusion, ignored cash, and mismatched measurement periods.
The default error, and a 4.70 point one here. It is the simple average wearing a portfolio label.
Cost basis is not market value. Weights must come from what the holdings are worth now.
January weights against December returns is a genuine mismatch. Prices move, so weights move with them.
Dropping the minus sign on our REIT turns 8.33% into 9.96%. That error is invisible in a spreadsheet.
Multiplying by 56 instead of 0.56 inflates everything a hundredfold. Check the weighted percentage calculator if the notation is tripping you.
Idle cash drags on returns and belongs in the denominator. The SEC’s guidance on asset allocation treats it as a real allocation.
One quarterly figure among annual ones corrupts everything. Confirm the window before you multiply.
Confirm the weights total 100%, recompute each contribution, check the answer sits between your best and worst holding, then rebuild it from dollar values as an independent test.
Add the weight column. Anything other than 100% means a holding is missing or double counted.
Recompute every weight times return, working up from the bottom row. Reversing direction catches what the first pass missed.
8.33% sits between −6.8% and 14.5%. A portfolio return outside that range is arithmetically impossible.
Total the dollar gains and divide by the portfolio value. $12,492 over $150,000 returns 8.33%, independently confirming the whole calculation. The weighted average interest rate calculator applies the same balance-weighted logic to debt.
Divide each holding’s market value by the total portfolio value to get its weight, multiply that weight by the holding’s return, then add the results. Our $84,000, $48,000 and $18,000 holdings weight to 56%, 32% and 12%, and their contributions of 8.12, 1.02 and −0.82 add to 8.33%. No final division is needed once weights sum to 1.
Each weight is one holding’s current market value divided by the total value of the portfolio. Use market value rather than cost basis, because weights change as prices move. An $84,000 position in a $150,000 portfolio carries a 0.56 weight. Recalculate weights whenever you recalculate returns, since stale weights are a common and invisible source of error.
For a fully represented portfolio, yes. Weights are shares of one whole, so anything less means a holding is missing from your data. If you are deliberately analysing part of a portfolio, divide by the weight actually covered to normalise it. Our four visible holdings covering 85% return 8.23% once normalised, against 7.00% if the gap is treated as earning nothing.
Because a simple average assumes equal position sizes. Averaging 14.5, 3.2 and −6.8 gives 3.63%, which would only be correct with $50,000 in each holding. The actual allocation puts 56% in the best performer, lifting the true return to 8.33%. The gap of 4.70 points comes entirely from position sizing.
Yes, whenever losses outweigh gains once weighted. If our REIT held 70% of the portfolio instead of 12%, its −6.8% would dominate and the total would turn negative despite two profitable holdings. The result always lands between your worst and best holding returns, so a negative total requires at least one negative holding.
It effectively becomes the portfolio. A holding at 80% weight contributes roughly four fifths of the reported return, and the remaining positions become rounding. This is worth watching deliberately, because a concentrated portfolio reporting a strong number may be reporting one lucky position rather than a working strategy.
No. Weighted average return weights by position size across one period. Time-weighted return weights by time, breaking the period at each deposit or withdrawal and chaining the sub-period results. Fund managers report time-weighted figures because they cannot control when you add money. Use it whenever cash moved during the period you are measuring.
No. Money-weighted return is the internal rate of return across all your cash flows, so the timing of your deposits changes it. Weighted average portfolio return ignores cash flows entirely and simply weights holdings by value. Money-weighted return judges the investor, time-weighted judges the manager, and weighted average judges the allocation.
Yes, and mixed portfolios are the normal case. Asset class is irrelevant to the arithmetic, since every holding contributes its return multiplied by its share of total value. Our five-class example combining stocks, bonds, cash, a REIT and a balanced fund returned 7.72% using exactly the same formula as a three-stock portfolio.
Back to those three holdings. The portfolio returned 8.33%, not 3.63%, and the difference was never about picking better investments. It was about counting the money before averaging the percentages. More questions about weighting are answered case by case, and the weighted average calculator prints the weighted sum and total weight side by side so you can audit every contribution. Which position is quietly writing most of your return?
Divide by whatever the weights actually total, not by 100. Worked examples above and below 100, normalising, and when a wrong total is a real warning.
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Divide total cost of goods available by total units available. Formula, COGS and ending inventory examples, periodic vs perpetual, FIFO compared.
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Calculate Weighted Average Online
The weighted average calculator multiplies each value by its weight, adds the weighted sum, divides by the total of weights, and prints the weighted average beside the standard arithmetic mean. Course grades, GPA, portfolio returns, and probability distributions all run through the same 4 steps.
Open the Weighted Average Calculator