Question 1

What is XIRR and why is it important?

Accepted Answer

XIRR (Extended Internal Rate of Return) calculates the annualized return of investments with irregular cash flows. Unlike simple returns, XIRR accounts for the timing and amount of each investment or withdrawal, giving you the true picture of your investment performance. It's especially useful for SIPs, lumpsum investments, and partial withdrawals.

Question 2

How is XIRR different from CAGR?

Accepted Answer

CAGR (Compound Annual Growth Rate) works only with a single investment and final value. XIRR handles multiple investments and withdrawals at different times. For a single lumpsum investment with no intermediate cash flows, XIRR and CAGR will give the same result. For SIPs or irregular investments, only XIRR provides accurate returns.

Question 3

What is a good XIRR percentage?

Accepted Answer

For equity mutual funds, 12-15% XIRR is considered good over 5+ years. Debt funds typically deliver 6-8% XIRR. Hybrid funds fall in between at 8-12%. Compare your XIRR with the fund's benchmark index and category average. Remember, past returns don't guarantee future performance.

Question 4

How do I calculate XIRR for my mutual funds?

Accepted Answer

Add each SIP installment as a negative cash flow (money out) with its date. Add redemptions or current value as positive cash flows (money in). The calculator uses these to compute your annualized return. Most fund houses and portfolio trackers also show XIRR in their statements.

Question 5

Why is my XIRR negative?

Accepted Answer

Negative XIRR means you've lost money - your current value plus withdrawals are less than total investments. This can happen in bear markets or if you invested at market peaks. Don't panic if XIRR is temporarily negative; equity investments typically recover over longer periods (5+ years).

Question 6

Should I include dividends in XIRR calculation?

Accepted Answer

Yes, include dividends as positive cash flows on the date you received them. This gives you the total return including both capital appreciation and dividend income. If you reinvested dividends, treat them as separate investment transactions on their respective dates.

Date	Type	Amount	Cumulative Investment
1/1/2020	Investment	-₹1,00,000	₹1,00,000
1/7/2020	Investment	-₹50,000	₹1,50,000
1/1/2021	Investment	-₹75,000	₹2,25,000
31/12/2024	Withdrawal	+₹5,00,000	₹2,25,000

XIRR Calculator

Performance Analysis