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XIRR Calculator
Estimate returns on your SIP contributions with our XIRR calculator. Get a clearer picture of your investment's performance for strategic planning.
Date Amount
Here's the Extended Internal Rate of Return (XIRR) for your investments:
XIRR
% p.a.
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What is XIRR?
XIRR, or Extended Internal Rate of Return, is a financial term used to measure the annualized return of an investment over a period of time, taking into account irregular cash flows (investments or withdrawals). It differs from traditional methods like simple interest or compound interest by factoring in the timing and amount of each cash flow, making it a relatively accurate tool for calculating the real return on your investment.
When investing, you often make deposits or withdrawals at different times. These irregular investments can significantly impact the overall return of your portfolio. The XIRR formula helps account for these fluctuations by calculating the rate of return that makes the present value of all cash flows equal to zero.
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What is an XIRR calculator?
An XIRR calculator is a tool that allows investors to quickly and easily calculate their return on investment by inputting dates and amounts for each cash flow. Whether you're investing in stocks, mutual funds, or SIPs (Systematic Investment Plans), the XIRR calculator helps you calculate your return on investment by taking into account the precise timing and size of each investment or withdrawal.
Rather than manually calculating the XIRR using complex formulas, an online XIRR calculator simplifies the process, making it accessible even for beginner investors. By simply inputting the cash flows and their corresponding dates, you can instantly determine your XIRR, providing you with a detailed understanding of how your investment is performing.
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How to calculate XIRR: XIRR Formula
To calculate XIRR, a formula is used that solves for the rate of return that makes the sum of the present value of cash flows equal to zero. This involves iterative calculations, which can be quite complex if done manually. Here's a simplified version of the XIRR formula:
Where:
XIRR=(FV/PV)1/T -1
FV = Future Value (the final amount of money)
PV = Present Value (the initial investment amount)
T = Time period (usually in years)
In reality, the calculation is more complicated because the formula needs to take into account the timing of each individual cash flow. That’s why the XIRR formula is typically solved using specialized software or tools, like an online XIRR calculator, rather than by hand.
If you're looking for a quicker way to calculate XIRR online, using an XIRR estimator can help you perform the calculation automatically, saving you both time and effort.
What is the formula for calculating XIRR in Excel?
XIRR can be calculated using MS Excel as well. Here’s how you can easily calculate XIRR in MS Excel:
Imagine you invest Rs. 10,000 in January, another Rs. 7,000 in June, and Rs. 15,000 in December. After one year, your total investment grows to Rs. 32,000. To calculate XIRR, you need to account for the dates of each investment.
List all the cash flows (both positive and negative values) in one column. Positive values represent cash inflows (like dividends), and negative values represent cash outflows (like SIP investments).
In the next column, enter the corresponding dates for each cash flow.
Use this formula in Excel: “=XIRR(values, dates)”, where:
• Values: The range of cells containing the cash flows.
• Dates: The range of cells containing the corresponding dates.
This will give you the XIRR for your investment.
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How to use online XIRR calculator?
Using our online XIRR calculator is simple. Here's a step-by-step guide to help you calculate your XIRR online:
Enter dates and cash flows: Start by entering the dates of your cash flows, such as the dates you made investments or withdrawals. Along with each date, you need to enter the corresponding amount of money that was invested or withdrawn.
Submit data: After entering all the relevant data, simply click the “Calculate” button. The calculator will then compute the XIRR using the XIRR formula, considering the timing and amounts of the cash flows.
Interpret the results: Once the calculation is detailed, the XIRR estimator will provide the rate of return. This percentage reflects the annualized return on your investment, considering the exact timing of each cash flow.
Use the result for decision making: The calculated XIRR helps you evaluate the performance of your investment. A higher XIRR may indicate better returns, which could guide future investment decisions.
Using an online XIRR calculator takes the guesswork out of the process, providing instant results that can help you make informed decisions about your investments.
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XIRR vs. CAGR: Which one to use for your investments?
While both XIRR and CAGR (Compound Annual Growth Rate) measure the return on an investment, they are used in different scenarios:
XIRR is used when you have irregular cash flows. This could include monthly SIP contributions or occasional withdrawals. It captures the return on investments where the timing of cash flows matters.
CAGR is a simplified version of return calculation that assumes a consistent rate of return over the entire investment period. It is ideal for situations where you invest a fixed amount at regular intervals.
In general, if you want to calculate the extended internal rate of return for your investments and you have irregular cash flows, XIRR is the preferred tool. For a constant rate of return over a period, CAGR would be more appropriate.
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Benefits of a XIRR Calculator
Accuracy
The XIRR calculator gives a precise result by factoring in the exact timing of each cash flow. This is more reliable than methods that ignore timing, such as calculating simple returns.
Time-saving
Manually calculating XIRR is time-consuming and error-prone. An online XIRR calculator allows you to quickly compute your return without wasting time on lengthy calculations.
Comprehensive results
The XIRR calculator provides a detailed picture of your investment returns by considering irregular cash flows. Which is much more useful than basic annual return methods, which only give a partial view of your investment performance.
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Frequently Asked Questions
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A good XIRR depends on the type of investment. In general, anything above 10% is considered good, but this varies based on the asset class and risk involved. For example, equity investments might yield higher XIRR compared to fixed-income investments.
A 10% XIRR means that your investment has returned 10% annually, on average, considering the varying cash flows and their timings. It indicates that your investment is growing at an average rate of 10% per year.
In the SIP calculator, XIRR is used to measure the return on your SIP investments, factoring in the exact dates and amounts of each instalment. It gives you a more accurate picture of your returns than just looking at the total amount invested.
No, XIRR and CAGR are different. XIRR accounts for irregular cash flows and the timing of each cash flow, whereas CAGR assumes constant growth over the investment period.
A 70% XIRR in mutual funds is a very high return, especially over the short term. However, it’s important to compare it with similar mutual fund schemes and benchmarks to determine if it's truly exceptional.
The formula for XIRR involves solving for the rate of return that sets the net present value of all cash flows to zero. The calculation is complex and requires numerical methods, which is why it’s often calculated using an XIRR estimator or an online XIRR calculator.
A good XIRR for a 5-year investment would depend on the asset type, but anything between 8-15% would generally be considered good. Higher returns could indicate above-average performance, but they also come with higher risk.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.
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