XIRR

The world of investing runs on numbers, and among all performance metrics, XIRR is one of the most crucial — especially for mutual fund investors who invest via SIP, STP, SWP, or irregular deposits.

While beginners usually rely on:

• Absolute return

• Annualized return

• CAGR (Compound Annual Growth Rate)

…these are not enough for SIP or multiple cash-flow investments.

Why?
Because investing through SIP means:

✔ You invest on different dates
✔ You invest different amounts
✔ You invest at different NAVs
✔ Time between installments varies

CAGR cannot calculate SIP return.

That’s why professionals use:

XIRR — Extended Internal Rate of Return

The most accurate method for measuring returns when multiple cash flows exist.

✔ XIRR meaning
✔ XIRR formula (concept-level)
✔ SIP return calculation
✔ Mutual fund performance evaluation
✔ XIRR for withdrawals
✔ Portfolio XIRR
✔ XIRR vs CAGR vs IRR
✔ Real examples
✔ Tables
✔ Frequently asked questions

Let’s begin.

What Is XIRR?

XIRR (Extended Internal Rate of Return) is the annualized return you earn on an investment when:

✔ You invest money on different dates
✔ With different amounts
✔ And withdraw/redeem at different times

It calculates your personalized annual return.

Why XIRR Exists? (The Logic Behind It)

Most people do not invest a single lump sum.
Real investing looks like this:

• SIP every month

• Top-ups

• Step-up SIP

• Occasional lumpsum

• Partial withdrawals

• STP in/out

• Redemption from multiple dates

Traditional return formulas cannot handle this complexity.

Only XIRR handles:

✔ Multiple cash inflows
✔ Multiple cash outflows
✔ Different dates
✔ Different amounts

This makes XIRR the most accurate, real-world return calculation method.

Where Is XIRR Used?

You will find XIRR used in:

✔ SIP Returns

The most common usage.

✔ SWP Returns

When money is withdrawn monthly.

✔ STP Returns

When funds move between schemes.

✔ Portfolio Trackers

Groww, Zerodha Coin, ET Money, Kuvera etc. all use XIRR.

✔ Business cash-flow analysis

For irregular revenue/investments.

✔ Real estate investment returns

When money is invested at different stages.

The XIRR Formula (Concept-Level)

Technically, the XIRR formula is:

Where:

• r = XIRR

• Cash Flow = Investments (negative) and withdrawals (positive)

• Time t = exact date difference

You don’t need to calculate manually — Excel, Google Sheets, financial calculators do it instantly.

How XIRR Works (Simplified Practical Explanation)

Let’s say you:

• Invest ₹10,000 on 1 Jan

• Invest ₹10,000 on 1 Feb

• Invest ₹10,000 on 1 Mar

• Total invested = ₹30,000

On 1 Dec, the value becomes ₹35,000.

But your investment-dates differ, so the returns must consider:

✔ Time invested
✔ Date difference
✔ Compounding
✔ Cash-flow timing

XIRR calculates a single annual rate that fits all these inflows and outflows.

Example 1: SIP XIRR Calculation (Simple Case)

SIP: ₹5,000 per month
Period: 12 months
Final value = ₹70,000

XIRR formula considers dates like:

• 1 Jan (₹ −5000)

• 1 Feb (₹ −5000)

• …

• 1 Dec (₹ −5000)

• 1 Jan (Final value ₹ +70000)

The result:
XIRR ≈ 18.8%

It is your true annual return, not simple average.

XIRR vs CAGR vs IRR — Critical Comparison

XIRR = The real-world, practical version of CAGR.

Why SIP Requires XIRR (Not CAGR)

CAGR formula assumes:

✔ Single investment
✔ One start date
✔ One end date

But SIP has:

❌ Multiple investments
❌ Multiple dates
❌ Multiple units
❌ Varying NAVs

Hence:

👉 SIP return must be calculated through XIRR.

Example 2: SIP Calculation with NAV Differences

Let’s assume SIP of ₹10,000:

Total invested: ₹30,000
Total units: 308.33
Current NAV: ₹150

Value = ₹46,249.5

Absolute Return = 54%
But…

XIRR (annualized return) = 33.8%

This is the real return.

XIRR Works in All Hard Situations

✔ Market crashes

XIRR shows true return even if market fluctuates.

✔ Monthly, weekly, irregular SIP

XIRR considers exact time invested.

✔ Partial withdrawal

Still accurately calculates annual return.

✔ STP (Systematic Transfer Plan)

XIRR handles both outgoing and incoming money.

✔ Dividend reinvestment

Included in calculations.

Example 3: Multiple Investments + One Redemption

Investment flow:

• Jan 1: –₹20,000

• Apr 1: –₹20,000

• Sep 1: –₹10,000

• Dec 1: Final Value ₹75,000

Using XIRR → 22.4% annual return

Example 4: SWP (Systematic Withdrawal XIRR)

Let’s say:

• Invest ₹5,00,000

• Monthly withdrawal ₹10,000

• After 3 years, value = ₹4,80,000

XIRR will consider:

✔ Outflows (your monthly withdrawals)
✔ Remaining corpus

XIRR might be:
6.1% annual return

This is the real performance after SWP.

XIRR in Portfolio Tracking

A portfolio may contain:

• SIP in Equity fund

• Lumpsum in Debt fund

• STP to Index Fund

• SWP from Hybrid fund

All cash flows are irregular.

Only XIRR can combine everything and show:

👉 “Your total portfolio return is 12.8% per year.”

This is why:

✔ Zerodha
✔ Groww
✔ Coin
✔ ET Money
✔ Kuvera
✔ Morningstar

All use XIRR.

XIRR & Excel (Practical Guide)

You can calculate XIRR in Excel using:

Where:

• Values = investment amounts (negative) & final value (positive)

• Dates = corresponding dates

Excel instantly gives the return.

Why XIRR Is the Most Accurate Metric

Because it considers:

✔ Exact date
✔ Exact cash flow
✔ Exact compounding
✔ Real money movement

CAGR assumes regular intervals.
XIRR handles real-life investing.

When XIRR Can Be Misleading

Although XIRR is very accurate, it can be misleading if:

❌ The investment period is too short
❌ There are extremely large cash flows
❌ Frequent deposits/withdrawals distort compounding
❌ You invested only recently and markets are volatile

For a correct picture, use minimum 1-year XIRR.

XIRR in Mutual Fund Statements

Your mutual fund app displays:

• Absolute Return

• XIRR

• Current Value

• Invested Value

XIRR is the most important number.

⭐ Comparison Table: XIRR vs CAGR

⭐ CAGR vs XIRR Example Table

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XIRR in Real-World Investing

✔ Equity SIP

XIRR = best method.

✔ Index fund SIP

XIRR calculates true compounding.

✔ Hybrid fund SIP

Same relevance.

✔ Gold fund SIP

Accurately shows returns.

✔ Retirement planning

XIRR helps evaluate long-term SIP performance.

15 Frequently Asked Questions (FAQs)

1. What is XIRR?

A method to calculate annualized return for irregular cash flows.

2. Why is XIRR used for SIP?

Because SIP has multiple dates and amounts.

3. Can XIRR be used for lumpsum?

Yes, but CAGR is simpler.

4. Can XIRR be negative?

Yes, if investment value falls.

5. Why is XIRR more accurate than CAGR?

Because CAGR assumes one cash flow.

6. Does XIRR show real return?

Yes.

7. Does XIRR account for dates?

Yes.

8. Does NAV affect XIRR?

Indirectly, through value changes.

9. Can XIRR be used for real estate?

Yes.

10. Can XIRR be used for business?

Yes, for cash-flow-based valuation.

11. Which is better for MF performance?

XIRR.

12. Does XIRR show risk?

No.

13. What is a good XIRR?

8–15% long-term.

14. Does XIRR account for taxes?

No.

15. What is XIRR in Excel?

A function to calculate personalized annual return.

Conclusion

XIRR (Extended Internal Rate of Return) is one of the most essential tools for evaluating investment performance when contributions occur at multiple intervals. Whether investing through SIP, withdrawing via SWP, transferring via STP, or handling multiple irregular cash flows, XIRR becomes the only accurate method to calculate true annualized return.

Unlike CAGR, which works only for lump sum investments, XIRR intelligently incorporates the specific dates and amounts of each investment and redemption. This allows investors to understand the real performance of their portfolio—even amid fluctuating markets and irregular contribution patterns.

In modern investing — from mutual funds to real estate, business financing, or global portfolios — XIRR is the preferred performance metric used by financial professionals, apps, advisors, and wealth managers. It reflects real compounding, real investment timing, and real value growth.

Understanding XIRR is vital for investors aiming to track long-term wealth, evaluate SIP performance, compare mutual funds, or plan future financial goals. With XIRR, your financial calculations become far more realistic, accurate, and meaningful.

Disclaimer

This article is for educational purposes only and does not constitute financial or investment advice. Investing is subject to market risks. Returns shown through XIRR are historical and not guaranteed. Consult a qualified financial advisor before investing.