XIRR Calculator Online – For SIP Investments
If you are an investor who makes multiple investments or withdrawals at different points in time, you might be wondering how to calculate the return on your portfolio. You might have heard of CAGR, which stands for Compound Annual Growth Rate, but did you know that CAGR is not suitable for irregular cash flows?
In this blog post, we will introduce you to XIRR, which stands for Extended Internal Rate of Return, and show you how to use it to measure the return on irregular investments. You can use our XIRR Calculator Online to calculate returns on your investments.
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XIRR Calculator
Investments:
Maturity:
XIRR Returns Calculator Results:
| Total Invested Amount | Maturity Amount | Total Returns in % | XIRR Returns in % |
|---|---|---|---|
| – | – | – | – |
What is XIRR?
XIRR is a financial tool that calculates the internal rate of return (IRR) of a series of cash flows that occur at irregular intervals. It takes into account the time value of money and provides a more accurate measure of return on investment, especially for investments with irregular cash flows.
Consider reading more on IRR on Investopedia.
XIRR is useful for situations where you invest or withdraw money at different times and amounts, such as:
- Investing in a mutual fund through SIPs (Systematic Investment Plans)
- Investing in a stock or bond that pays dividends or coupons on different dates
- Investing in a project that has multiple inflows and outflows
- Investing in a portfolio that has multiple assets with different cash flows
XIRR tells you the annualized rate of return that makes the net present value (NPV) of all cash flows equal to zero. In other words, it tells you the rate of return that equates the present value of your investments with the present value of your returns.
How XIRR is Calculated in the XIRR Calculator
XIRR is calculated by using a formula that solves for the rate of return that makes the NPV of all cash flows equal to zero. The formula is:
XIRR = r such that NPV = 0
where:
- NPV = Net Present Value of all cash flows
- r = Annualized rate of return
- Cash flow = Amount of money invested or withdrawn at a given date
The NPV of a cash flow is calculated by discounting it by the rate of return and the time elapsed since the initial investment. The formula is:
NPV = Cash flow / (1 + r) ^ t
where:
- t = Time elapsed in years since the initial investment
To calculate XIRR, you need to input the following data:
- The initial investment amount and date
- The subsequent cash flows (positive or negative) and their dates
- A guess value for the rate of return (optional)
You can use our online XIRR calculator or an Excel spreadsheet to compute XIRR easily. Alternatively, you can use an iterative method to find XIRR manually.
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What is the difference between XIRR and CAGR
CAGR and XIRR are both measures of annualized returns, but they have some key differences in their calculations and applications. Here is a summary table that compares XIRR vs. CAGR:
| XIRR | CAGR |
|---|---|
| Accounts for irregular cash flows | Assumes lump sum investment |
| Considers all cash flows throughout the investment period | Only considers the beginning and ending values |
| Solves for the rate of return that makes NPV equal to zero | Calculates the average annual growth rate |
| More accurate and realistic for irregular investments | Simpler and easier for regular investments |
How Investors Should Interpret XIRR
XIRR is a useful tool for investors who want to compare the performance of different investments with irregular cash flows. It helps them evaluate the profitability and efficiency of their investments over time.
However, investors should also be aware of some limitations and challenges of using XIRR, such as:
- XIRR may not be unique or may not exist for some cash flow patterns.
- XIRR may be sensitive to small changes in cash flow timing or amounts.
- XIRR may not reflect the risk or volatility of an investment.
Therefore, investors should use XIRR with caution and supplement it with other metrics and analyses to get a holistic view of their investments.
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Final Thoughts on XIRR Calculator Online
XIRR is a powerful tool that can help you measure the return on irregular investments. It can help you compare different investments with different cash flow patterns and timings. However, XIRR is not perfect and has some limitations and challenges that you should be aware of.
You should use XIRR with caution and supplement it with other metrics and analyses to get a holistic view of your investments. Use our XIRR Calculator online to check your investment returns!
We hope this blog post has helped you understand XIRR better and how to use it effectively. Thank you for reading, and happy investing!
FAQs on XIRR Calculator Online
How to Calculate XIRR or Annualized Returns Using the XIRR Calculator?
To arrive at the Annualized returns, Use our XIRR Calculator and enter the investment and maturity amount along with the investment tenure information.
What is an Annualized Return?
An annualized return represents the rate of return on an investment over a one-year period. It's expressed as a geometric average, indicating potential earnings if the return compounds over time. However, it's important to note that this calculation doesn't account for possible price changes or volatility of the investment.
What is a good XIRR?
XIRR of 12% is considered as good for investments.
