Question 1

What is XIRR and when should I use it?

Accepted Answer

XIRR (Extended Internal Rate of Return) calculates the annualized return on investments with irregular cash flows — meaning investments and withdrawals that happen at different dates and amounts. Use XIRR when you have multiple SIP installments, partial redemptions, or any investment with non-uniform cash flows, as simple CAGR won't give you an accurate picture.

Question 2

How is XIRR different from CAGR?

Accepted Answer

CAGR works for a single investment with a single final value (point to point). XIRR handles multiple cash flows at different dates — for example, 36 monthly SIP investments followed by a lump sum redemption. For mutual fund SIPs, XIRR is the correct metric to evaluate actual returns since each installment has a different holding period.

Question 3

How do I enter cash flows in the XIRR calculator?

Accepted Answer

Enter investments (money going out) as negative amounts and returns/redemptions (money coming in) as positive amounts. For example, if you invested Rs 1,00,000 on Jan 1, 2023 and received Rs 2,50,000 on Jan 1, 2025, enter -100000 for the first date and 250000 for the second.

Financial Calculators