What Is XIRR?
XIRR (Extended Internal Rate of Return) is the annualized return of an investment when money goes in and out at irregular times — the real-world way to measure a portfolio's performance.
Last updated
Annualized return
9.86%
XIRR
What is XIRR?
Real portfolios rarely start with one lump sum and sit untouched. You add money most months, maybe withdraw some, and each of those cash flows lands on a different date.
XIRR finds the single annual rate that reconciles every one of those dated cash flows with the final value — the one interest rate that, applied to each contribution for the exact time it was invested, produces the balance you actually have today.
For a single lump sum with no cash flows in between, XIRR and CAGR give the same answer. But once you add or withdraw money at different times, CAGR can no longer describe what happened — and XIRR is what you need.
CAGR assumes one lump sum start to finish. XIRR handles the messy, real-world timeline of contributions and withdrawals.
Why XIRR matters
Real investing is irregular
Contributions and withdrawals happen on many different dates. XIRR is built for exactly that timeline.
It's what brokerages report
Brokerage statements and spreadsheet XIRR() functions use this method to show your personal return.
Comparable across accounts
Because it accounts for the timing and size of every cash flow, XIRR lets you compare accounts and strategies fairly.
CAGR can mislead
Once you add money over time, a naïve CAGR or absolute return overstates or understates how you actually did.
Quick formula
Each contribution and withdrawal is discounted back to the first date by the exact number of days it was invested. XIRR finds the annual rate r that makes all those discounted cash flows net to zero.
XIRR solves for r where Σ [ cashflowᵢ ÷ (1 + r)^(dayᵢ/365) ] = 0Where:
- cashflowᵢ = each dated cash flow — contributions are negative, withdrawals and the final value are positive
- dayᵢ = number of days between that cash flow and the first one
- r = the annualized rate XIRR solves for
Real-world example
Suppose you invest $1,000 at the start of every month for three years, then look at what the pot is worth.
A naïve start-to-end CAGR would be wrong, because most of your money was only invested recently — it hasn't had three years to grow, just the first contribution has.
XIRR accounts for the exact date of every $1,000 deposit and returns the true annualized return on the money you actually had invested over time.
- Start
- $10,000
- End
- $16,000
- Total Return
- 60.00%
- CAGR
- 9.86%per year
Common mistakes
Confusing it with CAGR or absolute return
CAGR needs a single lump sum, and absolute return ignores timing entirely. XIRR is the measure that handles dated cash flows.
Ignoring the dates of cash flows
XIRR is driven by when money moves, not just how much. Dropping the dates changes the answer completely.
Annualizing very short periods
Over a few weeks or months, XIRR can produce wild annualized figures. It is most meaningful over a full year or more.
Comparing money-weighted with time-weighted returns
XIRR is money-weighted (it reflects your contribution timing). Time-weighted returns strip that out, so the two are not interchangeable.
XIRR vs related measures
| Metric | What it measures | Handles irregular cash flows? |
|---|---|---|
| XIRR | Annualized, money-weighted return across dated cash flows | Yes |
| CAGR | Annualized return for a single lump sum | No |
| IRR | Same idea as XIRR but assumes equally spaced periods | No |
| Absolute Return | Total percentage gain, not annualized | No |
Frequently asked questions
What is XIRR?
XIRR (Extended Internal Rate of Return) is the annualized return of an investment that has cash flows on irregular dates. It finds the single annual rate that reconciles every dated contribution and withdrawal with the final value.
What is the difference between XIRR and CAGR?
For a single lump sum with no cash flows in between, XIRR and CAGR give the same answer. But CAGR assumes one start value and one end value, while XIRR handles money added or withdrawn at many different times — which is what happens in a real portfolio.
How is XIRR calculated?
XIRR discounts each cash flow back to the first date by the exact number of days it was invested, then solves for the annual rate that makes all those discounted cash flows net to zero. There is no closed-form formula, so it is solved iteratively — the same math as Excel and Google Sheets XIRR().
When should I use XIRR?
Use XIRR whenever money goes in or out at irregular times — for example, monthly ETF contributions, occasional lump sums, or withdrawals. In those cases CAGR and absolute return can be misleading.
Is XIRR the same as IRR?
Almost. IRR assumes cash flows happen at equal, regular intervals, while XIRR uses the actual calendar dates. XIRR is the more general version and is what you want for real-world investing, where cash flows are rarely perfectly spaced.
How do I calculate XIRR in Excel or Google Sheets?
Both have a built-in XIRR() function. List each cash flow (contributions negative, the final value positive) alongside its date, then call =XIRR(values, dates). The function solves iteratively and returns the annualized rate.
You might also like
Dollar Cost Averaging Calculator
Compare investing all at once with spreading the same amount over time.
Try the Dollar Cost Averaging CalculatorExplore returns and growth
Use Rionux calculators to explore how returns, time, contributions, and inflation shape long-term outcomes.
Rionux provides educational content and tools only. This is not financial advice.