When money moves in or out of a portfolio mid-period, a simple ending-minus-beginning-value return gets distorted — Modified Dietz corrects for that by weighting the cash flow by how long it was actually invested.
How it works
Subtracting the cash flow from the ending-minus-beginning change gives the actual investment gain; dividing that by the beginning value plus the cash flow weighted by the fraction of the period it was invested gives the Modified Dietz return.
What this does not include
This does not include multiple cash flows within a single period — this calculator handles the common single-cash-flow case; a portfolio with several interim flows would need each one weighted and summed into the denominator separately.
How to use this calculator
- Enter beginning value, ending value, the cash flow amount, and when in the period it occurred.
Frequently asked questions
Why not just use the true money-weighted return (IRR) instead?
Modified Dietz is a simpler, non-iterative approximation that’s close enough for most reporting purposes and doesn’t require solving an equation numerically the way a true IRR calculation does.
What does a cash flow “weight” close to 1 mean?
It means the cash flow arrived very early in the period, so nearly its full value counts in the denominator, as if it had been invested essentially the whole period.
Is Modified Dietz used in official performance reporting standards?
Yes — it’s a widely accepted method under the CFA Institute’s Global Investment Performance Standards (GIPS) for calculating portfolio returns between full valuation dates.
