What is XIRR and How Is It Calculated?
XIRR โ Extended Internal Rate of Return โ is the standard method used by mutual fund platforms, brokerages, and financial advisors to measure the actual annualised return on an investment portfolio with irregular cash flows. Unlike simple return percentages, XIRR accounts for the exact timing and size of each investment and redemption.
The XIRR Formula
XIRR finds the rate r such that the Net Present Value (NPV) of all cash flows equals zero:
Where:
Cแตข = Amount of each cash flow (negative for outflows, positive for inflows)
dแตข = Number of days from the first cash flow to cash flow i
r = XIRR (annualised rate)
Our calculator uses Newton-Raphson iterative method to solve for r, converging to a precision of 0.00001%.
Worked Example
You invest โน10,000 on 1 Jan 2020, โน10,000 on 1 Jan 2021, โน10,000 on 1 Jan 2022, and receive โน37,000 on 1 Jan 2023. The XIRR is approximately 15.6% p.a.
Frequently Asked Questions
What does XIRR stand for?
XIRR stands for Extended Internal Rate of Return. It calculates the annualised return rate on a series of cash flows that occur at irregular intervals, making it ideal for measuring the actual return on SIP investments, partial redemptions, or ad-hoc investments.
How is XIRR different from CAGR?
CAGR assumes a single investment at the start and a single payout at the end. XIRR handles multiple cash flows at different dates. This makes XIRR far more accurate for SIP investments where money is invested monthly and possibly redeemed at various points.
What sign convention should I use?
Use negative numbers (โ) for cash outflows (amounts you invest/pay) and positive numbers (+) for cash inflows (amounts you receive/redeem). For example, if you invested โน10,000, enter โ10000. If you received โน15,000 on redemption, enter +15000.
Why does my XIRR calculation fail?
XIRR requires at least one positive and one negative cash flow to converge. If all values have the same sign, or if the cash flows are economically impossible (e.g., you receive less than you invested across all scenarios), the algorithm will not find a valid rate.
What is a good XIRR for a mutual fund?
For equity mutual funds in India, an XIRR of 12โ18% over a 5โ10 year period is generally considered good. Large-cap funds typically deliver 10โ14%, while mid/small-cap funds may reach 15โ20%+. Compare your XIRR to the benchmark index to assess fund performance.