XIRR

Extended Internal Rate of Return (XIRR) is the single annualised return rate that makes the net present value of a series of irregular, dated cash flows equal to zero. It is the correct return metric for Systematic Investment Plans (SIPs), Systematic Withdrawal Plans (SWPs), and any portfolio with multiple dated purchases and redemptions.

Formula

XIRR solves for r in: 0 = Σ [ CF_i / (1 + r)^{((d_i − d₀) / 365)} ] where CF_i is each dated cash flow (negative = outflow/investment, positive = inflow/redemption) and d_i is the date of that cash flow. Unlike IRR, which assumes uniform periods, XIRR handles any arbitrary calendar dates.

XIRR vs CAGR — When to Use Each

Scenario	Correct Metric	Why
Single lump-sum investment, single redemption	CAGR	Equivalent to XIRR; simpler calculation
Monthly SIP with ongoing or final redemption	XIRR	CAGR cannot handle irregular multi-date flows
Portfolio with partial withdrawals	XIRR	Each withdrawal is a dated cash flow
Comparing two SIP portfolios	XIRR for both	Normalises for different investment amounts and dates

Worked Example (INR)

An investor makes monthly SIP of ₹10,000 from 1 January 2020 through 31 December 2024 — 60 instalments, ₹6,00,000 total invested. Final portfolio value on 31 December 2024 = ₹8,40,000 (entered as a positive cash flow on that date). Excel XIRR function on this series returns approximately 13.6% per annum. A naive CAGR on ₹6,00,000 → ₹8,40,000 over 5 years would give a different (incorrect) answer because it ignores the staged deployment of capital.

How to Compute XIRR

• Microsoft Excel / Google Sheets: =XIRR(cashflows_range, dates_range) — built-in function
• Python: scipy.optimize.newton or the pyxirr library
• AMC statements: Most AMC consolidated account statements (CAS via CAMS/KFintech) display XIRR automatically

AMFI's Mutual Fund Utilities platform and SEBI-mandated CAS (Consolidated Account Statement) per SEBI Circular SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/573 both display XIRR-based returns for investor portfolios.

Limitations of XIRR

• Multiple sign changes: If cash flows alternate positive and negative many times, the XIRR equation can have multiple mathematical solutions. The function typically returns the one closest to zero — verify reasonableness.
• Comparison caveat: XIRR is portfolio-specific; comparing XIRR across investors requires same investment periods to be meaningful.
• No forward projection: XIRR is backward-looking — it measures historical return, not a forecast.

Source: SEBI CAS Circular SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/573; AMFI CAS standard (amfiindia.com).

Regulatory note: SEBI mandates disclosure of scheme returns in specific formats per SEBI MF Regulations 1996, Schedule VII — XIRR is the required metric for SIP return disclosure in advertisements per SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2021/647.

Related terms: CAGR, Rolling Returns, IRR.

Past performance is not indicative of future returns. ARN-314872. APMI APRN-01658. Content is informational.