Portfolio
What is XIRR (Extended Internal Rate of Return)?
XIRR calculates the annualized return of an investment with irregular cash flows, the most accurate way to measure portfolio returns when you make recurring contributions or partial withdrawals (401(k) deposits, IRA contributions, SIPs in India, dividend reinvestments).
Formula
XIRR solves: Ξ£ [Cash Flow_i Γ· (1 + XIRR)^((Date_i - Date_0)/365)] = 0
How to Interpret
XIRR is essential whenever money enters at different times - US investors making 401(k)/IRA contributions, or Indian investors running SIPs. Simple absolute return doesn't account for timing; XIRR does. Excel/Google Sheets has a built-in XIRR() function.
Typical Ranges
8β10% XIRR for US equity long-term is solid (S&P 500 ~10% historical). Or international markets like India: 12β15% XIRR is solid, above 20% is exceptional.