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XIRR is indeed a crucial parameter for measuring returns on any investment. Be it a lump sum investment or irregular (SIP) investment.
The full form of XIRR is “Extended Internal Rate of Return”.
XIRR factors in the timings of investment to calculate the return.
It considers both the value and time of investments.
In case of a partial withdrawal/redemption, XIRR will calculate the overall returns on investment.
How to calculate XIRR
Using spreadsheet software like Microsoft Excel or Google Sheets simplifies the process of calculating XIRR. Organize your data with cash flows and corresponding dates in the spreadsheet, then use the XIRR formula.
The software automates the calculation, providing a quick and efficient way to determine the extended internal rate of return.
3 easy steps to calculate XIRR are:
Step 1: Key in your investment amounts.
Note: Use a negative (-) sign for the mutual funds purchase (inflows)
For eg, -5000, and for redemption (outflow), simply input the amount as shown in the example.
Step 2: Key in the date of each transaction (in the format mm/dd/yyyy)
Eg If investment ie, SIP started on 1st July 2023, input 07/01/2023
| DATES | SIP |
| 01/01/2022 | -1000 |
| 02/01/2022 | -1000 |
| 03/01/2022 | -1000 |
| 04/01/2022 | -1000 |
| 05/01/2022 | -1000 |
| 06/01/2022 | -1000 |
| 07/01/2022 | -1000 |
| 08/01/2022 | -1000 |
| 09/01/2022 | -1000 |
| 10/01/2022 | -1000 |
| 11/01/2022 | -1000 |
| 12/01/2022 | -1000 |
| 12/01/2022 | 12,800 |
| XIRR | 14.90% |
Step 3: At the end, Use the XIRR mathematical formula
=XIRR(Value,Dates,[guess_rate])*100
i.e., =XIRR(cash flow amount,cash flow dates,[expected ROI])*100
Eg. =XIRR([-1000,-700,2000],[01/01/2023,02/01/2023,02/01/2023])*100
i.e., =XIRR(A2:A5,B2:B5,12%)*100
Note: Expected ROI is optional
MutualFundWala has made it easy for you. Use the spreadsheet provided to calculate your XIRR.
In equity investments, a higher XIRR (around 12-15% or more) is often considered a good XIRR. In contrast, debt investments, being generally less risky, may have a lower expected XIRR (around 7-9%).
Investors must evaluate their risk tolerance, financial goals, and investment horizon when determining what constitutes a “good” XIRR.
Investors also read ‘How does mutual funds compounding work?
How much XIRR is good
In equity schemes, exceeding 12% is considered favourable, while in debt schemes, surpassing 7% is deemed good.
Can XIRR be negative?
Yes, a positive XIRR implies a profitable investment, and a negative XIRR indicates a loss.
