XIRR
Extended Internal Rate of Return
The annualised return of an investment when money goes in and out on irregular dates.
Detailed explanation
A SIP puts in money every month, and you may redeem partially at any time. Each instalment is invested for a different length of time, so a single CAGR cannot describe the result. XIRR solves for the one discount rate that makes the present value of all dated cash flows equal zero.
Formula
Solve for r where Σ [ Cash flow_i / (1 + r)^(days_i / 365) ] = 0
Example
₹10,000 invested monthly for 24 months (₹2,40,000 total) ends at ₹2,85,000. XIRR works out to roughly 17% p.a., even though the absolute gain is 18.75%.
Why it matters
It is the only honest way to judge your own SIP performance and to compare it against a benchmark or an FD.
Key points
- Each cash flow is weighted by how long it stayed invested.
- Outflows are negative, redemptions and final value are positive.
- Spreadsheets compute it with the XIRR() function.
Related tool
XIRR calculatorRelated terms
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.