XIRR Calculator
Calculate the Extended Internal Rate of Return (XIRR) for irregular cash flows
Cash Flow Entries
Add cash flows to calculate XIRR
Example Scenarios
Click on any example to see how XIRR is calculated for different investment scenarios:
Cash flows: 13
Period: 1/1/2022 to 1/1/2023
Cash flows: 7
Period: 1/1/2020 to 1/1/2022
Cash flows: 8
Period: 1/15/2021 to 1/15/2023
What is XIRR?
Extended Internal Rate of Return (XIRR) is a method used to calculate the rate of return on investments with irregular cash flows occurring at different time intervals.
Unlike simple interest or CAGR, XIRR accounts for:
- Multiple cash inflows and outflows
- Exact dates of each transaction
- Different time periods between transactions
Understanding XIRR
XIRR vs. Other Return Metrics
While there are several ways to measure investment returns, XIRR stands out for specific scenarios:
- XIRR vs. CAGR: CAGR assumes a single investment at the beginning and a single redemption at the end. XIRR can handle multiple cash flows at irregular intervals.
- XIRR vs. Absolute Return: Absolute return simply measures the percentage change from beginning to end, without considering the time value of money or the timing of cash flows.
- XIRR vs. IRR: IRR assumes cash flows occur at equal time intervals, while XIRR considers the exact dates of each cash flow.
When to Use XIRR
XIRR is particularly useful for calculating returns on:
- SIP investments in mutual funds
- Staggered investments in stocks or other securities
- Real estate investments with multiple payments
- Any investment with irregular contributions or withdrawals
- Portfolios where you've added or withdrawn money at different times
How to Interpret XIRR Results
XIRR is expressed as an annualized percentage, similar to the interest rate on a fixed deposit. Here's how to interpret it:
- Positive XIRR: The investment has generated returns. Higher values indicate better performance.
- Negative XIRR: The investment has lost money.
- XIRR vs. Expected Return: Compare your XIRR to the expected return or benchmark for the investment type to assess performance.
- XIRR vs. Inflation: For long-term investments, compare XIRR to inflation to ensure real wealth creation.
Tips for Using XIRR Effectively
- Always include all cash flows, including fees and taxes if significant
- Use accurate dates for each transaction
- Remember that investment outflows should be negative values and returns/redemptions should be positive
- For ongoing investments, include the current market value as a positive cash flow on the current date
- Compare XIRR across similar time periods for meaningful comparisons
XIRR in Indian Investments: Practical Applications
In the Indian investment context, XIRR has become increasingly important as systematic investment plans (SIPs) in mutual funds have gained popularity. With over 6 crore active SIP accounts as of 2023, investors need a reliable method to calculate returns on their regular investments, and XIRR provides exactly that.
For Indian mutual fund investors, XIRR offers a more accurate picture than the point-to-point returns often highlighted by fund houses. This is particularly relevant for SIP investors who may have started investing at different market levels. Two investors in the same fund can have drastically different XIRRs depending on their investment timing and patterns.
XIRR is also crucial for evaluating tax-saving ELSS (Equity Linked Savings Scheme) investments, where investors typically make yearly contributions before the tax filing deadline. Since these investments often occur at different market levels and have a three-year lock-in period that expires at different times, XIRR provides the most accurate measure of performance.
In real estate, which remains a significant investment avenue in India, XIRR helps investors account for down payments, EMIs, rental income, and eventual sale proceeds to determine the true return on their property investments. This is particularly valuable given the high transaction costs in Indian real estate, including stamp duty, registration fees, and capital gains taxes.
Financial advisors in India increasingly use XIRR to demonstrate portfolio performance to clients, as it accounts for additional investments and partial withdrawals that are common in long-term financial planning. This transparency helps clients better understand their actual returns and make more informed decisions about their investment strategies.