Total Invested Outflows
₹ 1,50,000
Total Inflows / Current Value
₹ 2,15,000
Net Absolute Gain
₹ 65,000
Extended Internal Rate of Return (XIRR)
14.85%
About the XIRR Calculator
Our free XIRR Calculator helps investors determine the true annualized yield of investments involving multiple cash flows and irregular transaction dates, such as mutual fund SIPs, lump sums, and periodic stock purchases.
1. XIRR Mathematical Formula
The Extended Internal Rate of Return is calculated by setting the Net Present Value (NPV) of all cash flows to zero across exact transaction intervals:
0 = ∑ [ Pi / (1 + r)(di − d1) / 365 ]
Where the defined variables are:
- Pi: Individual cash flow amount (negative for investments/outflows, positive for redemptions/current valuations).
- di − d1: Exact number of days elapsed between each transaction date and the initial cash flow date.
- r: The annualized XIRR percentage rate computed via iterative numerical root-finding algorithms.
- 365: Standard convention factor representing days in a standard calendar year for time-weighting.
2. Practical Worked Example
Let us review a multi-tranche investment scenario with irregular cash flow timing:
- Tranche 1 (Jan 1, 2023): Initial investment outflow of −₹1,00,000
- Tranche 2 (Jun 15, 2023): Secondary investment outflow of −₹50,000
- Redemption / Current Valuation (Jul 29, 2026): Portfolio value inflow of +₹2,15,000
Calculation Breakdown:
- Total Invested Outflows = ₹1,00,000 + ₹50,000 = ₹1,50,000
- Total Inflows / Current Portfolio Value = ₹2,15,000
- Net Absolute Gain = ₹2,15,000 − ₹1,50,000 = ₹65,000
- Time-weighted discount rate balancing the net present value equation yields an annualized XIRR of 14.85%.
By accounting for exact calendar days between each deposit, XIRR provides an accurate annualized yield that simple average returns cannot replicate!
3. Frequently Asked Questions (FAQs)
1. What is the difference between CAGR and XIRR?
CAGR (Compound Annual Growth Rate) measures growth from a single starting point to an ending value. XIRR is specifically designed to handle multiple irregular cash additions and withdrawals over time.
2. Why do I need to include negative and positive signs?
Negative signs indicate money leaving your pocket (investments), while positive signs indicate money returned to your pocket (redemptions or final portfolio worth), allowing the formula to find the exact breakeven discount rate.
3. Can XIRR be negative?
Yes. If your total redemptions and current portfolio value are lower than your cumulative invested capital, your XIRR will reflect a negative annualized return percentage.
4. Is XIRR suitable for calculating mutual fund SIP returns?
Yes, because SIPs involve regular monthly installments made on varying dates across months, XIRR is the industry-standard metric used to compute true mutual fund returns.
5. How many cash flow entries are required to calculate XIRR?
A minimum of two cash flow entries with differing dates and opposite signs (at least one negative outflow and one positive inflow) are required to compute an XIRR value.
6. What happens if my XIRR calculation returns an error or N/A?
This usually happens if all cash flows have the same sign (all positive or all negative) or if dates are formatted incorrectly. Ensure you have at least one investment outflow (−) and one valuation inflow (+).
7. Does XIRR account for compounding frequency?
Yes, XIRR compounds cash flows continuously based on exact day counts relative to a standard 365-day calendar year convention.
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