XIRR

Investment

Extended Internal Rate of Return

A method to calculate the annualised return on investments with irregular cash flows, such as SIP instalments made on different dates.

Definition

Extended Internal Rate of Return (XIRR) is a method of calculating the annualised rate of return on an investment that involves multiple cash flows occurring at irregular intervals. Unlike CAGR, which requires a single beginning and ending value, XIRR accounts for each individual investment and redemption with its exact date.

XIRR is the standard measure for evaluating SIP returns in Indian mutual funds because SIP instalments are invested on different dates at different NAVs. Comparing two SIPs using CAGR would be misleading; XIRR is the correct and fair basis of comparison.

XIRR is also used by financial analysts to evaluate project cash flows, loan IRRs, and any investment involving multiple irregular cash flows.

Formula

XIRR finds the rate r such that:

∑ [Cᵢ / (1+r)^((dᵢ − d₀)/365)] = 0

Where:

Cᵢ = Cash flow at date dᵢ (negative for investments, positive for redemptions)
d₀ = Reference date (usually the first investment date)
r = XIRR (annualised return)

This equation has no closed-form solution and is solved iteratively (Newton-Raphson method).

Worked Example

You started a SIP of ₹5,000/month in an equity fund. After 3 years you have invested ₹1,80,000 in total. The current value of your portfolio is ₹2,24,000.

If you were to plug each of the 36 investment dates and amounts (as negative cash flows) and the current portfolio value (as a positive cash flow on today's date) into the XIRR formula, you might get an XIRR of approximately 14.3% per annum.

This is the true annualised return on your SIP, accounting for the timing of each instalment. The XIRR calculator automates this computation.

Key Things to Know

XIRR vs absolute return: An absolute return of 24% over 3 years sounds good, but the XIRR is only about 7.4% per annum — much less impressive. Always check XIRR for multi-period investments.
Redemption date matters: XIRR is sensitive to the ending date. Evaluating at a market low will give a lower XIRR; evaluating at a market high will inflate it. Use rolling XIRR for a robust view.
Excel formula: =XIRR(values, dates) in Microsoft Excel or Google Sheets. Values must include at least one negative (investment) and one positive (redemption/current value) cash flow.
Dividend reinvestment: When a fund pays dividends and you reinvest them, include those reinvestment amounts as negative cash flows on their respective dates for an accurate XIRR.
Comparison benchmark: A meaningful way to assess a fund is to calculate the XIRR of the same SIP invested in the Nifty 50 index for the same period and compare.

Related Calculators

XIRR Calculator →Calculate XIRR for your mutual fund SIP, lumpsum, or portfolio with irregular cash flows. Get the true annualised return on any investment in seconds.

SIP Calculator →Calculate your SIP returns instantly. Enter monthly investment, expected annual return, and time period to see total corpus, invested amount, and estimated gains.

CAGR Calculator →Calculate the Compound Annual Growth Rate of any investment instantly. Enter your initial value, final value, and time period to find CAGR or projected returns.

Frequently Asked Questions

Why use XIRR instead of CAGR for SIP returns?

CAGR assumes a single lump-sum investment. A SIP involves multiple investments made at different dates and different NAVs. XIRR handles these irregular cash flows correctly, giving you the true annualised return on all your instalments combined.

How is XIRR calculated?

XIRR uses an iterative numerical method to find the rate r that makes the net present value of all cash flows equal to zero. It considers the exact dates of each cash flow. You can calculate it in Excel using the =XIRR() function, or use our XIRR calculator.

What is a good XIRR for a mutual fund SIP?

For equity mutual funds over a 10-year SIP, an XIRR of 12–18% is generally considered good. For debt funds, 6–8% XIRR is typical. Compare your XIRR against the fund's benchmark index XIRR for the same period.

Can XIRR be negative?

Yes. If you invested during a market peak and are evaluating mid-cycle, XIRR can be negative. This is why SIPs should ideally be evaluated over a full market cycle of at least 5–7 years.

How does XIRR differ from IRR?

IRR assumes that cash flows occur at regular intervals. XIRR is an extension of IRR that handles cash flows occurring on specific, irregular dates — making it far more accurate for real-world investments like SIPs.