What is XIRR and Its Meaning in Funds?
The meaning of XIRR is Extended Internal Rate of Return, which is
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What is XIRR?
The XIRR full form is an Extended Internal Rate of Return. It is a method to calculate the returns on investments in which multiple transactions are taking place at different times. XIRR is different from Compound Annual Growth Rate (CAGR), which is only applicable to investments with a single cash flow. XIRR is commonly used to calculate the returns on your market-linked funds like-
You can use an SIP Calculator to plan your investments in market-linked funds.
- Insurance Companies
- Mutual Funds
|
Returns |
| Fund Name |
5 Years |
7 Years |
10 Years |
| SBI Life |
11.3% |
12.7% |
|
| HDFC Life |
19.5% |
15.44% |
|
| Axis Max Life |
29.43% |
23.7% |
|
| ICICI Prudential Life |
15.25% |
- |
|
| Tata AIA Life |
29% |
23.3% |
|
| Bajaj Life |
14.8% |
13.87% |
|
| Birla Sun Life |
19.5% |
15.7% |
|
| PNB MetLife |
31.41% |
24.68% |
|
| Canara HSBC Life |
11.48% |
11.26% |
|
| Star Union Dai-ichi Life |
14.54% |
- |
|
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Last updated: Dec 2025
What are Multiple Cash- Flows in XIRR?
The XIRR rate of return is calculated by considering the irregular cash flows made at different intervals. These transactions cover the following investments:
-
Investments through a Systematic Investment Plan (SIP),
-
Withdrawals made through Systematic Withdrawal Plans (SWP),
-
Additional purchases of units
-
Returns deposited in your fund,
-
Redemption of your fund
NOTE: Policybazaar has an online SIP calculator to get the estimated returns on SIP investment
SIP Calculator
Monthly Investment
₹22.4 L
Top Funds with High Returns (Past 7 Years)
13.24%
Equity Pension
16.3%
Global Blue Chip Anchor Strategy
18.4%
High Growth Fund
18.03%
US Growth Fund
20.89%
Multi Cap Fund
14.37%
Accelerator Mid-Cap Fund II
15.9%
Multiplier
14.95%
Frontline Equity Fund
18.41%
Pension Mid Cap Fund
11.46%
Equity II Fund
14.6%
US Equity Fund
15.46%
Growth Opportunities Plus Fund
12.12%
Equity Top 250 Fund
14.38%
Future Apex Fund
12.39%
Pension Dynamic Equity Fund
14.68%
Pension Enhanced Equity
IRR vs. XIRR
The Internal Rate of Return (IRR) and Extended Internal Rate of Return (XIRR) are both used to calculate the performance of your investments, but they differ by the cash flows they handle:
-
Internal Rate of Return (IRR): It takes into account all the transactions, but assumes they occur at equal intervals of time. IRR is suitable for investments with consistent cash flows. It is not precise for investments with uneven cash flows.
-
Extended Internal Rate of Return (XIRR): It considers both the amount and timing of cash flows, along with the exact date of their occurrence. XIRR is more accurate for investments with irregular cash flows.
| Feature |
IRR (Internal Rate of Return) |
XIRR (Extended Internal Rate of Return) |
| Definition |
Rate of return on an investment where Net Present Value (NPV) is zero |
Rate of return on investments with irregular cash flows |
| Cash Flow Timing |
Assumes regular, periodic cash flows (e.g., annually) |
Accounts for cash flows occurring at irregular intervals |
| Use Case |
Best for investments with regular cash flow intervals |
Ideal for investments with varying cash flow dates |
| Calculation Method |
Uses a fixed interval for calculations |
Uses exact dates for each cash flow |
| Accuracy |
Less accurate with irregular cash flows |
More accurate with irregular cash flows |
| Example |
Regular Cash Flows:
- Initial Investment: -₹10,000
- Year 1: +₹3,000
- Year 2: +₹3,000
- Year 3: +₹3,000
- Year 4: +₹3,000
- Year 5: +₹3,000
|
Irregular Cash Flows:
- Initial Investment: -₹10,000 (on 01-Jan-2020)
- Year 1: +₹2,000 (on 15-Feb-2021)
- Year 2: +₹5,000 (on 10-July-2022)
- Year 3: +₹4,000 (on 22-Nov-2023)
- Year 4: +₹7,000 (on 05-May-2024)
|
Why to Calculate XIRR in a Mutual Fund/ ULIP Fund?
It is essential to calculate XIRR in a mutual fund and ULIP fund for several reasons, some of which are as follows:
-
To get a more accurate measure of your returns for investments with irregular cash flows, as you invest and withdraw multiple times in mutual funds and ULIPs.
-
XIRR is a versatile tool that can be applied to any of the best investment plans, considering various cash flow patterns.
-
To track the performance of your investments over time and make better financial decisions.
How to Calculate XIRR?
You can use an Excel spreadsheet to calculate the XIRR return, which can handle data with multiple cash flows happening at irregular intervals. These cash flows can be gains/ returns/ redemption (positive numbers) or SIP/ deposits (negative numbers).
XIRR Formula in Excel:
XIRR in Excel = XIRR (cash flows, dates)
Where:
Steps to Calculate XIRR in Excel:
-
Step 1: List all your cash flows in one column as per below-
-
Inflows as positive (+)
-
Outflows as negative (-)
-
Step 2: Write the dates in a column for each of the respective cash flows.
-
Step 3: Click on a cell where you want the XIRR result to appear.
-
Step 4: Enter the formula: =XIRR(cashflow_range, dates_range)
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Step 5: Press Enter.
The Excel software will show the XIRR rate of return for the given cash flows as a percentage.
Illustration to Calculate XIRR in Excel:
Enter the cash flows in the Excel sheet as mentioned in the above steps. Here is an example:
| A |
B |
| Date |
SIP Amount |
| 01/02/2023 |
-20000 |
| 02/02/2023 |
-500 |
| 03/10/2023 |
-300 |
| 04/02/2023 |
10000 |
| 05/17/2023 |
27000 |
| 06/05/2023 |
105 |
| 07/08/2023 |
-500 |
| 08/01/2023 |
10000 |
| 09/10/2023 |
4500 |
| 10/14/2023 |
-1000 |
| XIRR = |
8.826828074 |
The XIRR is 8.82% p.a. which represents the internal rate of return for your cash flows, expressed as a yearly percentage.
XIRR Vs CAGR
CAGR, like XIRR, is a key metric that can be used to estimate the rate of return for your market-linked investments easily. A quick definition of both is as follows-
-
XIRR (Extended Internal Rate of Return): It calculates the annualized return on investments with irregular cash flows on different dates.
-
CAGR (Compound Annual Growth Rate): It measures the mean annual growth rate of your investment over a specific period.
The key differences between XIRR and CAGR are mentioned in the table below:
| Feature |
XIRR |
CAGR |
| Full form |
Extended Internal Rate of Return |
Compound Annual Growth Rate |
| Definition |
Rate of return on investments with irregular cash flows. |
Annual growth rate of an investment over a specified period. |
| Cash Flow Timing |
Consider cash flows occurring at irregular intervals. |
Assumes a single investment with no intermediate cash flows. |
| Calculation |
It considers the exact timing and amount of cash flows, making it suitable for irregular investments and withdrawals. |
It assumes a constant rate of growth over a specified period, regardless of cash flow timing. |
| Applicability |
Applicable on investments with multiple cash flows. |
Applicable on investments with a single cash flow. |
| Accuracy |
Assumes a single investment with no intermediate cash flows. |
Accurate for measuring consistent annual growth. |
| Example |
Irregular Cash Flows:
- Initial Investment: -₹10,000 (on 01-Jan-2020)
- Year 1: +₹2,000 (on 15-Feb-2021)
- Year 2: +₹5,000 (on 10-Jul-2022)
- Year 3: +₹4,000 (on 22-Nov-2023)
- Year 4: +₹7,000 (on 05-May-2024)
|
Single Investment Growth:
- Initial Investment: ₹10,000
- Value after 5 years: ₹16,000
|
Wrapping It Up
XIRR (Extended Internal Rate of Return) is a valuable metric for evaluating the performance of ULIP and mutual funds. This method accounts for the time and amount of your investments by considering both inflows and outflows. XIRR offers a more accurate representation of an investment fund's performance, helping you to make informed decisions about your investments.
Frequently Asked Questions
-
What is a good XIRR rate?
The definition of a good XIRR rate depends on a number of factors, including the asset class, the investment horizon, and your risk tolerance. However, as a general rule of thumb, an XIRR of 11-12% is considered good for equity funds, and 7-8% is considered good for debt funds.
-
Is XIRR better than CAGR?
XIRR is considered to be a better measure of investment returns than CAGR, especially for investments with irregular cash flows, such as SIPs. However, CAGR is easier to calculate and understand, so it is often used as a more general measure of investment performance.
-
What is the formula for XIRR?
The XIRR formula is:
XIRR(values, dates, [guess])
where:
-
Values: An array of cash flows, where a negative value represents an outflow and a positive value represents an inflow.
-
Dates: An array of dates corresponding to the cash flows.
-
Guess: An optional argument that provides an initial guess for the XIRR. If omitted, Excel will use a default value of 10%.
-
What is the major difference between IRR and XIRR?
The major difference between IRR and XIRR is that IRR assumes that all cash flows in your investment fund occur at the end of the period, while XIRR takes into account the actual timing of the cash flows. This makes XIRR a more accurate measure of the true returns of an investment, especially for investments with irregular cash flows.
-
What is XIRR?
XIRR means Extended Internal Rate of Return for irregular cash flows. It is a financial metric used to calculate the return on an investment when cash flows occur at uneven intervals.
-
How is XIRR different from IRR?
IRR and XIRR both help you to assess the performance of your investments. However, the IRR function assumes cash flows happen at regular periods, while, XIRR considers uneven cash flows at different time intervals. This makes the XIRR more versatile for real-world scenarios.
-
What are the benefits of using XIRR?
The benefits of XIRR are that it provides a more accurate picture of investment performance when cash flows are irregular and helps compare investments with different cash flow patterns.
-
What are the disadvantages of XIRR?
The main disadvantage of XIRR is that it assumes all cash flows are reinvested at the Internal Rate of Return (IRR), which might not always be true. It may not provide you a solution if cash flows have a specific pattern.
