📊 XIRR

Unlike simple CAGR, which assumes one investment and one exit, XIRR solves for the discount rate r that makes the net present value of all your cash flows (in and out, each on its actual date) equal to zero:

0 = Σ CFi / (1 + r)(di − d0)/365

This requires iterative solving since there's no closed-form algebraic solution. It's the honest measure when your flows look like a real Investment Growth plan — SIPs, top-ups, and partial withdrawals — rather than a single lump investment.

If you invested 50,000 on 1 Jan, 30,000 on 1 Jun, and your holdings are worth 95,000 on 31 Dec of the same year, XIRR accounts for the fact that the 30,000 was invested for only 7 months, not a full year, giving a more accurate annualized return than a simple percentage gain would.

People often confuse XIRR with absolute return (total gain ÷ total invested) which ignores the timing of cash flows entirely, or with CAGR, which only works for a single lump-sum investment with no additions or withdrawals in between.

What it does

Calculates the true annualized return of investments with irregular cash flows — deposits and withdrawals of any size at any dates.

When to use it

Use it to measure the real performance of a mutual fund, SIP with skipped months, or a portfolio with mixed purchases and sales. CAGR alone misleads when cash flows are uneven.

Assumptions

• The first listed cash flow should be an outflow (money invested).
• Returns are annualized assuming reinvestment at the computed rate.
• Past performance measured this way is not a promise of future returns.