Short answer: XIRR is the single annualised rate that, when applied to every investment and redemption with its date, makes the present value of those cash flows equal the current value of your holding. It extends the internal rate of return (IRR) so that it handles cash flows on irregular dates, which suits mutual fund investments made in pieces.
Last reviewed: 9 November 2026
At a glance
| Term | What it means |
|---|---|
| XIRR | Annualised rate that equates all dated cash flows with the current value of the holding |
| IRR | Standard version, which assumes cash flows occur at set, periodic intervals |
| Investment | Entered as a negative cash flow |
| Redemption or current value | Entered as a positive cash flow |
| Holding not yet sold | Latest NAV multiplied by units held, entered as a positive cash flow dated today |
| CAGR | Suits a single lump-sum investment |
How does XIRR measure a return?
A simple percentage gain compares the final value with the amount put in. That works when there is one investment and one exit, but most mutual fund histories look different.
Suppose you run a systematic investment plan (SIP), where a fixed amount goes into a fund on set dates, and later make a partial redemption, which means selling some units back to the fund. You now have several cash flows on several dates. XIRR finds one yearly rate that accounts for all of them, giving each amount credit for the time it was invested.
How is XIRR different from CAGR?
Compound annual growth rate (CAGR) measures how a single amount grew from its starting value to its ending value over a period. It suits a single lump-sum investment, where one amount goes in and one value comes out.
XIRR suits irregular cash flows, including SIPs, lump-sum investments, systematic withdrawal plans (SWPs), where fixed amounts are withdrawn at intervals, and partial redemptions. If your history has several dates on either side, CAGR cannot describe it with one starting and one ending figure.
How are the cash flows entered?
The sign of each cash flow matters. Investments are entered as negative cash flows, and redemptions are entered as positive cash flows, each with its own date.
If you still hold units, the calculation needs a value for them. Use the latest net asset value (NAV), which is the price of one unit, multiplied by the units you hold. Enter that figure as a positive cash flow dated today, as if you had sold everything at that price.
What does a simple XIRR calculation look like?
This example is hypothetical and the figures are invented for illustration only. Suppose ₹1,00,000 was invested on 1 January 2022, and the holding was worth ₹1,21,000 on 1 January 2023 with no other transactions. The cash flows are −₹1,00,000 on 1 January 2022 and +₹1,21,000 on 1 January 2023.
Here the XIRR is 21%, because ₹1,00,000 grew to ₹1,21,000 at 21% over exactly one year. Add a second investment on a different date, and the single percentage gain no longer tells the story. XIRR then solves for one rate that fits every date at once.
How do you calculate XIRR in Excel?
Microsoft Excel computes XIRR with the function =XIRR(values, dates, [guess]). The values argument is the range of cash flows, and the dates argument is the matching range of dates. The guess argument is optional, and it gives Excel a starting estimate for the rate.
Each value must line up with its date, so a misplaced row changes the answer. Investments stay negative and redemptions or the current value stay positive, as described above.
Does a higher XIRR mean a better fund?
Not on its own. XIRR does not measure investment risk, and it does not guarantee future returns. A high XIRR describes a past pattern of cash flows, so it cannot tell you whether the same pattern will repeat.
The dates you chose also shape the number. Two investors in the same fund can get different XIRRs because they invested and withdrew on different dates. Comparing XIRR figures therefore says little about the fund alone, and it says nothing about how much the value swung along the way.
Frequently asked questions
Is XIRR the same as CAGR?
No. CAGR suits a single lump-sum investment, while XIRR suits irregular cash flows such as SIPs, SWPs and partial redemptions.
Does XIRR show how risky a fund is?
No. XIRR does not measure investment risk, and it does not guarantee future returns.
What value should I enter for a holding I have not sold?
Enter the latest NAV multiplied by the units held as a positive cash flow dated today.
Sources and last check
Facts in this article were checked against the sources below on 9 November 2026. Rules and figures can change; check the primary source before acting.
- groww.in (broker education)
- upstox.com (broker education)
- icicidirect.com (broker education)
- kotakneo.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.