XIRR Calculator 2024

What is XIRR (Extended internal rate of return calculator)?

XIRR (Extended Internal Rate of Return) is a financial metric used to calculate the annualized return rate on investments with irregular cash flows over time. Unlike the standard Internal Rate of Return (IRR), which assumes that cash flows occur at regular intervals, XIRR is designed to handle scenarios where cash flows are unpredictable or occur at different times.

XIRR for Mutual Funds

In the context of Mutual Funds, XIRR means the annualized rate of returns that you’ve earned on your investment. It provides accurate value of your overall return instead of simply having a look at NAV

How to Calculate XIRR: XIRR Formula?

While XIRR calculation might be complex, most financial calculators and spreadsheets like excel have inbuilt functions to calculate it. Here’s how the XIRR value is calculated

XIRR = Rate (Dates, Cash Flows, Guess)

• Date means specific date of each cash flow
• Cash flow refers to the investment amount
• Guess refers to the initial guess for the return rate

Easy-to-Understand Example

Suppose you invest

January 1st, 2023: Invested ₹10,000

April 1st, 2023: Invested ₹5,000

July 1st, 2023: Withdrew ₹2,000

October 1st, 2023: Invested ₹3,000

January 1st, 2024: Your investment is worth ₹22,000

Then your XIRR is 12.5%

Which is the better indicator of returns among XIRR vs CAGR

While XIRR considers spread out cash flows over time, CAGR assumes a single, lump-sum investment. XIRR provides realistic returns for SIP investors and is a powerful tool for evaluating the performance of your mutual fund investments, considering the time value of money and multiple cash flows

What is a good XIRR?

A XIRR in the range of 12% – 15% is generally considered strong returns for equity mutual funds in India

What is the formula for calculating XIRR in Excel?

XIRR can be calculated using Microsoft excel as they have inbuilt functions to calculate XIRR

XIRR formula for calculating in excel is XIRR(Values, dates, guess)

Step by step procedure to calculate XIRR in Excel

• Enter all transactions dates in one column, all outflows like investments, purchases will be marked as negative while all inflows like redemptions would be marked as positive
• In the next column add the corresponding dates for each transaction
• In the last row, mention the current value of your holding and current date

Use the formula =XIRR (values, dates) to get the XIRR value.

This function allows investors to easily calculate and analyze the performance of their mutual fund investments, considering the impact of timing on returns.

Easy-to-Understand Example

SIP amount = Rs. 5,000

SIP investment duration – 01/01/2024 and end 01/06/2024

Redemption date – 01/07/2024

Here cash flows are occurring at irregular intervals,

Open an Excel sheet and follow these steps

• Column A, enter the transaction dates
• In Column B, SIP figure of 5000 as negative
• Enter the redemption amount at end as 31000
• In the box below 31000, XIRR (B1:B7, A1:A7)*100
• XIRR value of 12.32% will be displayed as the result

FAQ on XIRR in Mutual Funds

1. What is a good XIRR for 5 years?

A “good” XIRR can vary depending on the type of investment and market conditions. Generally, an XIRR above 10% per year is considered strong for many investments, especially in equity markets. For safer investments like bonds or savings accounts, a lower XIRR might be acceptable. In the context of a 5-year investment, a higher XIRR indicates a more profitable return relative to the risk and market performance.

2. Is an XIRR of 20% good?

Yes, an XIRR of 20% is considered very good. It means that, on an annualized basis, your investment has grown at a rate of 20% per year, which is well above average for most types of investments, including stocks, mutual funds, and even some high-risk ventures. This rate indicates a high return on investment, assuming it aligns with your risk tolerance and investment goals.

3. How do I calculate my XIRR?

To calculate XIRR, follow these steps:

1. List Your Cash Flows and Dates: Record all cash inflows and outflows along with their corresponding dates.

2. Use an XIRR Calculator: You can use online calculators or spreadsheet software like Excel. In Excel, use the XIRR function:

   =XIRR(values, dates)
   • values: The cash flows (negative for investments, positive for returns).
   • dates: The dates corresponding to each cash flow

3. Interpret the Result: The output will be the annualized rate of return.

4. What does 10% XIRR mean?

A 10% XIRR means that your investment has provided an annualized return of 10% per year. This percentage reflects how much your investment has grown each year, taking into account the irregular timing of cash flows. For instance, if you invested ₹100,000 with an XIRR of 10%, your investment would be worth approximately ₹161,000 after 5 years, assuming no additional contributions or withdrawals.