An annualised return for investments with several cash flows on irregular dates, such as SIPs, top-ups and partial withdrawals.
XIRR is the single annual rate that, applied to every cash flow on its actual date, balances all the money you put in against all the money you took out — including today’s value of what you still hold. It is the internal rate of return extended to irregular dates, hence the X.
Why it matters
Real investing is uneven: monthly SIPs, an occasional lump sum, a withdrawal for a family expense. A simple “total gain ÷ total invested” ignores when the money went in. An instalment invested last month has had no time to grow, yet a simple percentage treats it like one invested five years ago. XIRR accounts for the timing of every rupee.
How to read it
- Investments are entered as negative cash flows; withdrawals and the current value as positive ones.
- XIRR can be compared directly with a deposit rate or a CAGR, because all three are annual rates.
- Over short periods of a few months, XIRR can swing to extreme values because small gains or losses get annualised. Treat short-period figures with caution.
Common misconceptions
- “My SIP is up 20%, so my return is 20%.” That is the absolute gain on the total invested. The XIRR could be higher or lower depending on when the instalments were made.
- “XIRR tells me what I’ll earn.” It measures what has already happened, not what will.
Note: Many portfolio statements and tools report XIRR for SIP investments. The XIRR explainer walks through the calculation step by step with your own cash flows.
Formula
XIRR is the rate r that solves Σ [Cash flowᵢ ÷ (1 + r)^((dateᵢ − date₀) ÷ 365)] = 0. It has no closed form and is found numerically, by trial and refinement.
Worked example
For illustration, assume you invested ₹1,00,000 on 1 January and another ₹1,00,000 on 1 July, and the holding is worth ₹2,10,000 on 31 December. The absolute gain is 5%, but the second instalment was invested for only half the year, so the XIRR works out to about 6.7% a year.
Figures are for illustration only — not a forecast or a recommendation.
Related terms
CAGR
Compound Annual Growth Rate
The steady yearly growth rate that would take an investment from its starting value to its ending value over a given period.
SIP
Systematic Investment Plan
A way to invest a fixed amount in a mutual fund at regular intervals, usually monthly, instead of investing everything at once.
Compounding
Earning returns on past returns as well as on the original amount, so growth accelerates the longer money stays invested.
Real return
Your return after accounting for inflation — the growth in what your money can actually buy.
Lumpsum
Investing a single, larger amount at one time, rather than spreading it across instalments.