Everything About XIRR in Mutual Funds 2024

Calculating XIRR in Mutual Funds is an easier way to track your mutual fund performance. Unlike CAGR (Compound Annual Growth Rate) which suits one-time investments, XIRR excels for regular investments through systematic investment plans (SIPs). XIRR calculates returns by taking into account both investments and withdrawals, giving you an accurate snapshot of your profits. Think of it as a personal GPS for your investments which navigate you through ups and downs. It is the hassle-free, intelligent approach to monitor your investment journey.

Everything About XIRR in Mutual Funds 2024

Table of Contents

XIRR in Mutual Funds?

XIRR is a method used in mutual funds to accurately calculate your investment’s return. It accounts for all deposits and withdrawals, providing a comprehensive view of your investment’s performance. Whether you’re making regular investments (SIPs) or withdrawing a fixed amount (SWPs), XIRR tracks all the cash flow movements. This helps you understand your investment’s growth potential and make informed decisions. In short, XIRR is a valuable tool that gives you insights into how your mutual fund investment is performing.

How Does XIRR in Mutual Funds Work?

XIRR in mutual funds works like a sleuth discovering the interest rate that corresponds to the growth of your investment. It’s not a magical process but involves a series of trials and errors. XIRR evaluates various interest rates until it identifies the one that aligns with the final value of your investment, similar to trying on different shoes to find the best fit. Although it may seem complex, XIRR seamlessly calculates the performance of your investment without you having to do the heavy lifting.

XIRR Formula:

The XIRR formula calculates the internal rate of return (IRR) for an investment with irregular cash flows.

Formula: XIRR = ((NPV(Cash Flows, r)) / Initial Investment)*100


  • Cash Flows: Total inflows and outflows of money during the investment period.
  • NPV (Net Present Value): Current value of all future cash flows adjusted for the time value of money.
  • Initial Investment: Initial amount invested in the investment.
  • R (Interest rate): Estimated annual growth rate of the investment which the formula solves for. It is the annual rate at which your investment grows.

Example of XIRR Calculation:

Let’s use the XIRR formula to see how it works:

Investment Details:

  • Invested Rs. 10,000 on January 1st
  • Withdrew Rs. 2,000 on July 1st
  • Final balance: Rs. 11,000 on December 31st
  • XIRR Formula Calculation: Using the XIRR formula, we get a rate of return of about 10%.

Explanation: If you had invested Rs. 10,000 initially and earned a 10% compounded interest rate, you would have Rs. 11,000 at the end of the year. The XIRR formula shows how your investment has performed over time, considering both deposits and withdrawals. In this case, your investment grew by 10% despite the withdrawal.

How to Calculate XIRR in Excel?

To calculate XIRR in mutual fund in excel, you need to follow these steps:
  • Input Cash Flows and Dates: Enter your cash flows in a column, with the corresponding dates listed in another column, arranged chronologically.
  • Select Result Cell: Select the cell where you want the XIRR result to display.
  • Input Formula: Type the formula “=XIRR(cash flows, dates)” and press Enter.
  • Excel will compute the XIRR based on the provided cash flows and dates which display the result in the selected cell.
In the formula:
  • Cash Flows: The range of cells containing the cash flow amounts.
  • Dates: The range of cells containing the corresponding dates.
By following these steps, you can easily calculate XIRR in Excel to analyze the returns on your mutual fund or ULIP investments

Benefits of Using XIRR in Mutual Funds

Here are the key benefits of using XIRR in mutual funds:

  • Improved Accuracy: XIRR calculates returns more accurately than CAGR by considering the timing of cash flows, such as deposits and withdrawals. This is especially relevant for mutual funds and ULIPs which involve frequent transactions.
  • Consistent Results: XIRR provides consistent returns even when cash flows are inconsistent. Unlike CAGR, XIRR delivers a reliable measure of investment performance.
  • Flexibility: XIRR can evaluate returns for investments with any cash flow pattern. Its adaptability makes it a versatile tool for assessing investment performance across various scenarios.
  • Clarity: XIRR provides a transparent overview of investment returns based on actual cash flows. This allows investors to easily track the performance of their investments.
  • Accuracy: XIRR takes into account fees and expenses related to mutual funds. This results in a more precise estimate of actual returns which gives the investors a clearer understanding of the potential earnings from their investments.

Difference between XIRR and CAGR

XIRR (Extended Internal Rate of Return):

  • Description: It tells you how much your mutual fund investment has grown annually over a certain period.
  • What it measures: Annual growth rate of a mutual fund investment
  • Multiple Cash Flows: It does not account the multiple cash flows over the specified period
  • Return: It measures the absolute return of your investment
  • Usefulness: It calculates the returns on one-time investments in mutual funds.

CAGR (Compound Annual Growth Rate):

  • Description: It calculates the average rate earned on each cash flow you invest over a period.
  • What it measures: Average rate of return on each cash flow invested over time
  • Multiple Cash Flows: It considers all cash flows including deposits and withdrawals
  • Return: It shows the annualized return which gives a clearer picture of returns over time.
  • Usefulness: It calculates the returns on mutual funds invested through SIPs or SWPs.

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For evaluating the performance of your mutual fund investments, XIRR (Extended Internal Rate of Return) is the ideal indicator. It differs from CAGR (Compounded Annual Growth Rate) by considering all cash flows (inflows and outflows). This makes XIRR more comprehensive and suitable for investments that involve multiple transactions like systematic investment plans and systematic withdrawal plans.

Frequently Asked Questions (FAQ)

Furthermore, banks are instructed to promptly disable AePS services for accounts where the only AePS transaction within the last 12 months is reported as fraudulent. The NPCI also emphasised the need for explicit customer consent regarding the offering of AePS services

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