XIRR Calculator
An XIRR calculator helps you calculate the accurate annualised return on investments by factoring in the exact timing of each cash flow. Unlike CAGR, which assumes uniform periods, XIRR gives a real-world view of your portfolio’s performance.
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An XIRR calculator is an online or Excel-based tool that calculates the extended internal rate of return (XIRR) for a series of cash flows occurring at irregular intervals. Unlike the standard IRR formula, which assumes equal time periods between cash inflows and outflows, XIRR considers the exact dates of each transaction. This makes it particularly useful for investors who make multiple investments or withdrawals over time.
Using an XIRR calculator, investors can quickly determine the effective annualised return of their investments without manually crunching numbers for each irregular cash flow.
In Excel, the XIRR function makes this calculation straightforward. The syntax is:
=XIRR(values, dates, [guess])
1. values – a range of cash flows, with negative values representing investments and positive values representing returns.
2. dates – a corresponding range of dates for each cash flow.
3. [guess] – an optional estimate of the expected return. Excel defaults to 0.1 (10%) if left blank
Using an online XIRR calculator is simple and user-friendly. Here’s how:
1. Enter the initial investment as a negative cash flow.
2.. Add all subsequent inflows and outflows, along with the corresponding dates.
3. Click on Calculate or Submit.
4. View the annualised return, expressed as a percentage, which accounts for the exact timing of your investments and withdrawals.
Online calculators are especially helpful for investors who want to quickly assess multiple investment scenarios without manually using Excel.
CAGR (Compound Annual Growth Rate) and XIRR both measure investment returns, but they serve different purposes.
CAGR assumes a fixed investment period and calculates the steady growth rate needed to move from the initial investment to the final value. This works well for lump-sum investments held over uniform periods but does not consider multiple transactions at different times.
On the other hand, XIRR accounts for irregular cash flows, making it ideal for SIPs (Systematic Investment Plans), recurring investments, or partial withdrawals. While CAGR provides a simplistic view, XIRR delivers a more accurate reflection of your actual returns, making it the preferred choice for investors with multiple cash flow events.
Using an XIRR calculator comes with several advantages:
1. Accurate returns: Provides a precise annualised return that accounts for the exact timing of cash flows.
2. Time-saving: Eliminates manual calculations for multiple transactions.
3. Easy comparisons: Allows investors to compare the performance of various investments or portfolios.
4. Financial planning: Helps in forecasting future returns based on historical cash flows.
5. Decision-making: Supports better investment decisions by showing realistic returns for irregular investments.
Overall, an XIRR calculator is a powerful tool for investors who want to track, evaluate, and optimise their portfolio performance with accuracy and convenience.
FAQs
A good XIRR depends on investment type and risk. For equity funds, 12–15% per annum is ideal, while for debt or low-risk investments, 6–8% per annum is considered satisfactory.
In a SIP calculator, XIRR shows the actual annualised return considering the timing and amount of each contribution, giving a more realistic picture than CAGR for systematic investments with irregular cash flows.
A 10% XIRR indicates your investment grows at an effective annualised rate of 10%, accounting for the exact dates of contributions and withdrawals. It represents the true annual return earned over time.
Not always. CAGR assumes a single lump-sum investment over fixed periods, whereas XIRR considers irregular cash flows. Only in steady, single-investment scenarios will XIRR and CAGR yield similar returns.
XIRR is calculated using: ∑Ci(1+r)(Di−D0)/365=0\sum \frac{C_i}{(1+r)^{(D_i-D_0)/365}} = 0∑(1+r)(Di−D0)/365Ci=0, where CiC_iCi are cash flows, DiD_iDi are dates, D0D_0D0 is initial investment, and rrr is the annualised return.
For a five-year horizon, equities with 12–15% per annum and debt instruments with 6–8% are considered good. Longer-term equities benefit from compounding, while debt funds provide stable, lower returns.
List all investments as negative and returns as positive with exact dates. Use Excel’s =XIRR(values, dates) formula or an online XIRR calculator to get your annualised return, reflecting actual investment performance.
To double an investment in three years, an XIRR of around 26% per annum is required, derived from the doubling-time formula considering the compounding effect over the investment period.
For a two-year period, equities giving 10–12% and debt instruments providing 5–7% annualised returns are considered reasonable. Short-term XIRR can fluctuate significantly due to market volatility.
Yes, XIRR can be negative if withdrawals or losses outweigh investments over time. A negative XIRR indicates that the portfolio is losing value annually, reflecting poor performance or adverse market conditions.
A bad XIRR occurs when returns fall below inflation or benchmark performance. For example, equity mutual funds returning under 6–7% per annum over the long term are generally considered underperforming investments.
Disclaimer: The calculator available on the 5paisa website is intended for informational purposes only and is designed to assist you in estimating potential investments. However, it is important to understand that this calculator should not be the sole basis for creating or implementing any investment strategy. View More..