XIRR Calculator - Calculate Extended Internal Rate of Return

What is XIRR (Extended Internal Rate of Return)?

XIRR stands for Extended Internal Rate of Return. It is a financial function that calculates the annualized return rate of an investment that has irregular cash flows. Unlike traditional return calculations that assume regular investments, XIRR can handle investments made at different dates and in different amounts, making it perfect for SIP (Systematic Investment Plan) calculations.

How to Calculate XIRR?

XIRR calculation involves finding the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero. The formula uses an iterative method to find this rate:

XIRR vs CAGR: Key Differences

While CAGR (Compound Annual Growth Rate) is suitable for lump-sum investments, XIRR is designed for investments with multiple cash flows:

• CAGR: Single investment, single maturity date
• XIRR: Multiple investments at different dates
• CAGR: Assumes constant growth rate
• XIRR: Considers actual timing of each transaction
• CAGR: Simple formula calculation
• XIRR: Complex iterative calculation

Why Use XIRR for SIP Investments?

SIP investments involve regular contributions over time, making XIRR the most accurate method to calculate returns. Traditional return calculations don't account for the timing of each investment, which can significantly impact the actual rate of return.

How to Calculate XIRR in Excel?

You can easily calculate XIRR using Microsoft Excel's built-in function. Create two columns: one for dates and another for cash flows (negative for investments, positive for redemptions), then use the formula: =XIRR(values, dates)