What is XIRR?▾
The extended internal rate of return: the annualised rate that makes the present value of a series of cash flows equal zero, taking each flow's actual date into account. It is the correct measure when money goes in or out at irregular intervals.
When should I use XIRR instead of CAGR?▾
Whenever there is more than one cash flow. CAGR assumes one amount invested at the start; XIRR handles a SIP, top-ups, partial withdrawals or any irregular schedule. Using CAGR on a SIP overstates the return because it ignores that later instalments were invested for less time.
How should the signs be entered?▾
Money leaving you is negative, money coming back is positive. So investments are negative, redemptions and the final value are positive. Getting a sign wrong is the most common reason a result looks absurd.
Why does XIRR sometimes fail to produce an answer?▾
It is solved iteratively and needs at least one negative and one positive flow to converge. A series that is all one sign has no rate that zeroes it. Unusual flow patterns can also admit more than one mathematically valid answer.
Is XIRR the same as the return my fund reports?▾
Not usually. Funds typically report a point-to-point or CAGR figure for the scheme; XIRR measures your own experience, which depends on when you actually invested. Two people in the same fund can have very different XIRRs.
When should I use XIRR instead of IRR?▾
IRR assumes cash flows arrive at regular, evenly spaced intervals. XIRR uses the actual date of each one. Real business cash flows — a retention release, an irregular client payment, a milestone — almost never land on even periods, so XIRR is the more accurate of the two whenever you have real dates.
