XIRR Calculator

Why XIRR is the only return number that means anything

Most apps show you an absolute return. You put in ₹2 lakh, you now have ₹2.8 lakh, so 40%. It sounds precise and it is nearly useless, because it says nothing about how long the money was invested or when each part of it arrived.

A 40% gain earned over eight years is about 4.3% a year, which a fixed deposit would have beaten. The same 40% earned over eighteen months is about 25% a year. Identical headline, opposite conclusions. XIRR is what tells them apart.

How XIRR works

XIRR finds the single annual rate at which every cashflow, discounted from its own date, sums to zero. There is no closed-form solution, so it is solved numerically. The calculator above narrows in on the rate until the equation balances.

What most XIRR calculators will not do

Most of the XIRR calculators that rank for this term ask for a frequency, a start date, an end date and one recurring amount. That is a SIP calculator with a different heading. It cannot take the month you skipped, the top-up you made after a bonus, or the units you sold part way through, and those are exactly the events that pull a real portfolio away from its headline return.

Every row here carries its own date and its own amount, and you can add as many as you need. Enter money out as a positive investment and money back, whether a redemption or the value you hold today, as the closing amount. It is the same calculation a spreadsheet does with XIRR, without the spreadsheet.

How to use it

1. Add a row for every investment you made, with the date it actually left your account.
2. If you redeemed anything along the way, add it as an extra row on the day you took it out, but only enter it as a separate positive cashflow if you are comfortable editing the current value to match.
3. Set the current value to what the holding is worth today, and the valuation date to today.

The result is directly comparable to a fixed-deposit rate, to a benchmark index over the same dates, or to another fund. That comparability is the whole point.

A worked example

Invest ₹1,00,000 three years ago, ₹50,000 two years ago and ₹50,000 a year ago, and hold ₹2,80,000 today. Absolute return is 40%. XIRR is roughly 15% a year, because the later money has had far less time to work. The absolute figure overstates how well you actually did.

What XIRR still will not tell you

It measures the past, exactly and honestly. It says nothing about whether the portfolio that produced it was well built, or whether the same holdings make sense from here. For that you need someone to have written down why each position is held, which is what a model portfolio publishes.