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What is IRR and XIRR and how to Calculate it

by Manish Chauhan · 91 comments

How do you calculate your returns when you every year you invest different amount and at the end you receive your Money back? Suppose your invest 5000, 10000, 6000, 4000 and 6500 in 5 yrs and Get 53,000 at the end of 5 yrs then what is your Return? It’s 17.4%. The concept is called IRR. Read below to understand more:

So Here we will learn two things IRR and XIRR

What is IRR and How to Calculate it?

IRR is Internal Rate of Return and it is used to calculate the returns given some amount at a fixed interval i.e. after every 3 months or after every 1 yr. The only thing which matters is that there should be equal distance between two installments. We will learn how to Calculate IRR in Excel Sheet. You would also love to read what is NPV ( Net Present Value) .

How to calculate?

  • Enter your Investments (amount which you paid) in each row (you have to put “-” before each value)
  • Enter the Amount you Received at the end (put “+” after that amount)
  • Formula: =IRR(values)( place your values put the range of cells which contains values)  see below:

Use this Spreadsheet to calculate IRR for yourself

Things to NOTE

  • The values need to be a set of Positive and Negative Values
  • The last value is the amount you receive
  • Any amount Invested will be Negative so if you invest Rs 10000, put -10000
  • Any amount you Receive will be Positive so if you get Rs 5000, put +5000
  • All the payment or receiving of money are equidistant, Like 1st of every month OR May 15th Every year
  • All the payments are assumed to be yearly by default. If its’ some other time frame like monthly or quarterly use XIRR and put specific dates.

In the above example, the CAGR return was 17%. See this video post to understand how to calculate CAGR .

What is XIRR and How to Calculate it?

IRR does not solve one problem and that is when the payments are at Irregular interval. In that case we use XIRR. So in a Spreadsheet we put the date and the value both. See the example below:

How to Calculate

  • Put Date and Value for each row
  • At the last row put the Date and amount you received
  • Put the formula as: =XIRR(values, dates), values and dates are the cell ranges

Use this Spreadsheet to calculate XIRR for yourself

In the above example the CAGR Return was 38.96% (I have multiplied the return by 100 the actual value will be .3896)

Real Life scenario when you can use it

Scenario 1

Suppose you Invest in a Mutual Funds per month on your own , you invest on 15th of every month in year 2006

  • June 15 you invested 5000
  • July 15 you invested 6000
  • Aug 15 you invested 3000
  • Sep 15 you receive 5000 (dividend)
  • Oct 15 you invested 4000
  • Nov 15 you invested 12000
  • Dec 15 you Sell everything and Receive 35000

You can use IRR in this case and calculate your returns , the values you will be -5000 , -6000 , -3000 , +5000 , -4000 , +12000 , Calculate the IRR and put it as comments , lets see if you are correct or not ?


Scenario 2

You can also compare two business ideas using the XIRR , and decide which one is better then other . In any business concept you have to invest money and you get back some return , but these returns can be irregular and different amount every time , In that case you can use XIRR and compare the returns of both business and decide the one which has better XIRR

Note : the formula can give answers in a but different ways on Excel , OpenOffice spreadsheet , google docs or Zoho Spread sheet . Use this Spreadsheet to calculate IRR and XIRR for yourself . The spreadsheet is shared , so please dont make any changes other than “values” and “dates” .

Comments ? I would love to hear if these concepts are of use to you or can be of any help to you . is IRR a good way of measuring returns ?

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{ 89 comments… read them below or add one }

1 aditya M August 11, 2009 at 5:21 am

nice information
keep it on

really good


I am unable to use XIRR formula
its asking for a guess value in excel please clarify

Also at many offices-Its not possible to view your video tutorials or excel spreadsheets

Please see if you can do something



2 Sriram August 11, 2009 at 5:50 am

Nice writeup Manish.

If you are using MS-excel, you need to have analysis toolpak installed to get XIRR. Go to Tools -> Add Ins -> Analysis Toolpak


3 Manish Chauhan August 11, 2009 at 6:12 am


So when you put the formula for IRR or XIRR , you put some random value like .1 or .2 also as Guess value , so formula looks liks

=IRR(values , guess value)
= XIRR(values , dates , guess value)

Just put .1 or .2 in place of guess value. I hope it will work .

To download the spreadsheet , go here :

To download videos from youetube you can use keepwid.com tool .


Thanks :)



4 Anonymous August 11, 2009 at 1:26 pm

Very Nice Information..With IRR Function You use Insurance Cash Flow…

Manish Can You make One Excel Sheet about How To Use IRR & XIRR Formula With Complete Details ..


Nikhil Shah


5 Yogi August 11, 2009 at 7:57 pm

wow, I good formula.

I ll search excel for somemore..hehe



6 Manish Chauhan August 11, 2009 at 9:49 pm


What other information do you need ? I thought that this can be called as the "information on how IRR and XIRR can be used" ?


Thanks :)


7 White Lotus August 16, 2009 at 2:51 am

IRR/XIRR are good for relative comaparisions.

But what does it mean in absolute terms? Does a 17% IRR mean I get 17% annualised return on an average for every installment?



8 Karan Batra August 17, 2009 at 2:28 pm

I've also heard a term by the name of MIRR.. NAy idea regarding what is it??


9 khagesh April 23, 2010 at 10:56 am

irr is used as a concept to calculate the break-even discount rate when u have a conventional cash flow, i.e., one outflow followed by multiple inflows during the entire life of the project

but in case of non-conventional projects, where we have multiple outflows during the life of the project, we use the concept of mirr (modified int rate of return), because simple irr will give us multiple values. using irr will give us a number of discount rates, equivalent to the number of outflows.


10 Manish Chauhan April 23, 2010 at 11:10 am


Isin’t XIRR ? whats the difference between XIRR and MIRR ?



11 Manish Chauhan August 18, 2009 at 1:22 pm


yes , it means the annual CAGR return




12 Wayan November 16, 2009 at 5:38 pm

Can anyone give me an example of the equation to calculate the XIRR?
I want to make an application that calculate an XIRR like excel does. I used the Secant Method to compute the cash flow, but it still have a different result than excel does.


13 Wayan November 16, 2009 at 5:33 pm

Can anyone give me an example of the equation to calculate the XIRR?
I want to make an application that calculate an XIRR like excel does. I used the Secant Method to compute the cash flow, but it still have a different result than excel does.
Any help would be appreciated


14 manish November 16, 2009 at 8:48 pm


I think you should be using some Numerical method to compute XIRR .. There wont be just one formula where you can stuff values and get answer .



15 VSN December 1, 2009 at 10:08 am

Does XIRR provide annualised return


16 manish December 1, 2009 at 6:24 pm



17 mona December 2, 2009 at 5:33 pm

very gud info Manish.

Thanx. Keep going.


18 manish December 2, 2009 at 7:23 pm

thanks mona .. keep visiting :)



19 Manish Jain January 11, 2010 at 4:15 pm

Hey Manish,

We are pointing people to your post to explain XIRR.

.-= Manish Jain´s last blog ..Asset Class: Bond’s =-.


20 manish January 11, 2010 at 6:16 pm

Thanks Manish

I can see some people coming in from that link when i checked my live traffic :)



21 sandeep February 14, 2010 at 4:07 pm

i understand this will not work in case I’ve lumpsum invested for x yrs, right. IRR/XIRR is only for regular payments, like SIPs,yrly ULIPs etc, right ?


22 Manish Chauhan March 4, 2010 at 1:20 am


If you have invested one time then its more easy to find the CAGR .

CAGR = [(final_amount/amount_invested)^(1/tenure)] – 1



23 Raju March 11, 2010 at 9:45 pm

Thanks for the information. Very clearly described. I appreciate your effort.


24 Manish Chauhan March 12, 2010 at 12:29 pm


Thanks for the comment , keep commenting



25 Akash Acharya November 19, 2010 at 4:24 pm

Indeed explained well, my first google search reading for XIRR and I could do this myself.


26 Manish Chauhan November 19, 2010 at 6:34 pm


thats great to hear :)



27 Jayaprakash Kanreddy December 9, 2010 at 12:54 pm

Hi Manish,

Excellent information. How can I use this IRR/XIRR to check the return I’ve got in MF SIP invested over a period of 3 years? For example investing monthly 1k over 3 years and current value is 42k. So how much is the return, which formula should we use to calculate the return in this case?


28 Manish Chauhan December 22, 2010 at 1:45 pm

If the gap between the investments is same , then use IRR else use XIRR



29 Lalit Bajaj December 10, 2010 at 4:52 pm

Problem to install analysis toolpak, pls guide


30 Manish Chauhan December 10, 2010 at 6:11 pm


Ask your question on forum : http://www.jagoinvestor.com/forum/


31 SKDhawan February 14, 2011 at 7:27 pm

Thanks for explaining the cocept in such an easily understadable language. Please continue this as your contribution towards educating the educated illiterate.


32 Manish Chauhan February 14, 2011 at 7:50 pm

Welcome :) . Did you come to this article after seeing the video ?



33 ankita March 15, 2011 at 1:41 pm

Hey your website is of gr8 help to people.


34 Manish Chauhan March 15, 2011 at 4:28 pm

thanks Ankita


35 Debanjan Ray March 27, 2011 at 9:35 pm

XIRR formula does not seem to be accurate. I have calculated CAGR with trial-and-error basis and the result is coming significantly different from XIRR especially when CAGR value is more. See the excel sheet in:
My objective was to plot a graph of GAGR agains time to see that how CAGR is varrying and at what goal, one can sell a MF, if he reaches goal.


36 Manish Chauhan March 31, 2011 at 10:01 am


What is “Trial and error” in this case ? XIRR can not be wrong , if thats the case you are challanging Microsoft patents !



37 Debanjan Ray April 3, 2011 at 3:35 pm

Hi Manish,

“Trial and error” is a mathematical (numerical) method to find solution of a equation when direct solution is either difficult or not possible. In case of finding CAGR with a SIP, the formula is Y= (X *(1+r/12)^n-1)*12/r, where Y=Present market value of Mutual Fund ( = present NAV * no. of units of Mutua Fund), r= Annual CAGR, n= no. of months of SIP. Known values are Y, X and n. Our goal is to find out r.
Now, as you can see it is an equation of nth degree polynomial, which is difficult to solve. In numerical analysis, iterative techniques like newton-raphson method or method of bisection can be used, by guessing a CAGR value, and then calculating error (difference) between left side and right side of the above equation. Then process would be continued till the error value is well within accepted limit ( you can never get perfect solution).
Internally XIRR also does iteration, as described in Microsoft help. Actually XIRR has three parameters: XIRR(values, dates, guess) . In general, to start any iteration, an initial value is required. This is the “guess” value i.e. the third parameter. If you do not give the “guess” value, XIRR would assume something random, and the solution can become erroneous.

Microsoft claims “XIRR cycles through the calculation until the result is accurate within 0.000001 percent.” In your article, you have skipped to enter the 3rd parameter. This can be possible chance of variation in the example excel sheet I have given in my earlier post.

I gave an example in the excel: a SIP on HDFC Top 200, starting from 5-Apr-2010 with Rs. 1000, in the 7th month (5-Oct-10). When I gave 57.5% CAGR manually, error value was -3.10, whereas XIRR calculated CAGR was 75.17% resulting into an error of -374.28, whose absolute value is far more than my manual method. The anomaly increases as the CAGR increases.
I check with the SIP calculator with http://www.moneycontrol.com/ . It is also in line with excel.
May be I am wrong; but I need to know where I am wrong. Did I use wrong formula of CAGR? But, I derived CAGR formulae from basic; it is sum of G.P. series.

With best wishes


38 Manish Chauhan April 4, 2011 at 10:23 am


Looks like you did lot of study on this :) . good work

I think there can be one point we are missing , we are not sure if the payments are considered at the end of the period or the starting of the period because thats the only reason I can think for the difference we are getting .



39 Debanjan Ray April 6, 2011 at 9:11 pm

Hi Manish,
I have considered payment at the starting of the period. So the last SIP will run for zero duration. This means in the previous example, the 7th month SIP will not have any gain. At the beginning of 7th SIP, the 1st month SIP (=X) will run for 6 months growing to X*(1+ r/12)^6; 2nd month SIP will grow to X*(1+r/12)^5 and so on. Now do a simple addition.
At the end I can not trust XIRR; but can trust on basic mathematics of compound interest formula.
- Debanjan Ray


40 Manish Chauhan April 7, 2011 at 1:35 pm


I think you should go with the first principles only which is working for you , this whole topic will actually become a big project to study if we do it

Will take up this some time later , In between if you find something insightful in your studies , let me know



41 Anand April 12, 2011 at 11:31 pm

It’s not the question whether you trust XIRR or not. It’s like an eternal truth.

And excel does excellent job in giving you the answer; otherwise you have to break your head in mathematical formulas.


42 Anand August 26, 2011 at 4:05 pm

Debanjan Ray, can you just give me a small example where XIRR formula of excel returns false value?
I want to investigate.


43 Rupert August 7, 2012 at 4:36 pm

Dear Manish,

Could you tell me after calculating IRR how we can tell our client about annualized return say for example he invested 5000 for 11 months (SIP) and latest value is 56504 please guide me and which is good IRR or XIRR ???


44 Manish Chauhan August 8, 2012 at 7:24 pm


You can use IRR here , XIRR and IRR are same things ,just that XIRR is for irregular payments !


45 Rupert August 9, 2012 at 12:58 pm

Thanks for your reply I got it but when you want to convert to annualised how we have to do and which is the better irr or xirr ??


46 Rupert August 9, 2012 at 12:59 pm

Thanks for your reply I got it but when you want to convert to annualised how we have to do and which is the better irr or xirr ?? How to do annualised for an a SIP investments


47 Manish Chauhan August 10, 2012 at 6:17 pm

What ever IRR you get from for monthly payments , just do this

(1 + Monthly-IRR)^12 – 1

That would give you yearly IRR



48 Seenivasan September 22, 2012 at 9:29 am

Thanks Sir

This calculation is very useful for my final CFP exam


49 Manish Chauhan September 22, 2012 at 9:39 am

Welcome :)


50 Wakas December 19, 2011 at 3:55 pm

Hi Manish,

So going over your definations, what I understand is that we use XIRR when there are irregular intervals between the payments? (Since IRR assumes regular intervals between payments).

So if I am calculating my returns on equal distance semi-annual cashflows, using IRR and XIRR should give me same results? Or should I not be using the XIRR at all?

Does IRR consider investments on an annualized basis by default?


51 Manish Chauhan December 19, 2011 at 4:19 pm


Yes .. IRR and XIRR should give the same answer incase of equi distance payments . Note that IRR will assume that the payments are per year .. incase its for monhtly basis , then all you need to do is consider the returns as monthly and then convert it to yearly returns



52 Lino Asir January 13, 2012 at 6:22 pm

Really good one, which explains the IRR & XIRR in a simple and value added way.. Thank u…


53 Manish Chauhan January 13, 2012 at 6:48 pm


Good to hear that you learnt it easily :)



54 SYAM June 10, 2012 at 11:45 pm



55 Manish Chauhan June 12, 2012 at 7:41 am

Can you put all the numbers with date here ?


56 Magesh Dhasayyan June 13, 2012 at 9:46 pm


Shows a sample SIP investment calculation.
Is my assumption correct?
IRR(monthly-values) * 100= monthly-IRR %
IRR(monthly-values) * 100 * 12 = yearly-IRR %
XIRR(regular-monthly-values, date-values) * 100 = yearly-IRR %

If XIRR() is an extension of IRR() with date (regular or irregular), why is there a 1 % difference between IRR result and XIRR?



57 Manish Chauhan June 14, 2012 at 3:21 pm

Will look at this soon … kindly email me


58 Magesh Dhasayyan June 20, 2012 at 5:01 pm

Ref. http://www.brighthub.com/office/project-management/articles/99310.aspx

Added one more rate to the page. Monthly to Yearly IRR conversion calculated using ‘(1+r)^12 – 1′ is close to XIRR(). So I think that answers my question.


59 Mike B July 4, 2012 at 6:38 am

If I have a series of outflows and inflows, and want to see what the rate or return is on this, can I use XIRR? I am working out a bisiness plan with monthly payments and revenues, and the net result of the costs and revenues is sometimes profit and sometimes loss.

Must IRR/XIRR have all outflows, and the last one inflow? Or can they vary?


60 Manish Chauhan July 4, 2012 at 11:01 am

You can use XIRR in this case , it can have multiple inflows and outflows


61 A V Gosavi July 6, 2012 at 9:37 pm

Dear Manish,

I am really impressed. With your Reply that I consider IRR Or XIRR without me knowing what it is, I started searching on google, what are these terms. And before breaking my head on the mathematics involved, I got your Rejoinder to your Reply which explained what I needed with excellent analytical debate.

Indeed great and many many thanks.

Anand Gosavi.


62 Manish Chauhan July 7, 2012 at 8:28 am

Thanks for your appreciation !


63 Raj September 16, 2012 at 1:12 pm

Hi Manish,

My online MF SIP portfolio tracker is using XIRR instead of IRR to show the return being generated. Any reason behind the usage of XIRR even if it’s monthly SIP plan with equal interval?



64 Manish Chauhan September 16, 2012 at 6:51 pm

IRR just one case of XIRR ! .. Hence they might be using the highest standard ! .. Its like they must have implemented only XIRR so that all cases are handled, it might happen that some one is manually doing it on different dates and same algo will handle that case also , Whats the harm in that !


65 Sweet November 26, 2012 at 4:23 pm

Thanks guys …good information especially converting monthly to Annual IRR. which approximately equals IRR & XIRR values.


66 Manish Chauhan November 30, 2012 at 2:58 pm



67 Rajaram January 11, 2013 at 4:12 pm

thanks for giving good explanation


68 Manish Chauhan January 11, 2013 at 6:32 pm



69 kishore March 14, 2013 at 1:59 am

dear manish,
you did good job….. you gave excellent information to us. i appreciate your kind information. i have question for you? can u help me out? i have some goals. and i would like to make SIP for each goal…. like car, (in 3 year, 6 lac ) flat ( 6 year, 75 lac) and retirement plan (2.5 cr.). i am working in private bank. my annual salary is 1.8 lacs. my age is 24. plz give me some information regarding how much invest in each SIP and how much amount., which kind of instruments and portfolio i will used for investment…plz help me out


70 prasenjit March 23, 2013 at 12:38 pm

is there any website/software which computes portfolio return(portfolio consisting of stocks,mutual funds, fixed deposits, gold etc) based on time weighted methodology rather than dollar weighted (which is similar to xirr)


71 Manish Chauhan March 27, 2013 at 3:22 pm

Try Mprofit or Perfios


72 prasenjit March 29, 2013 at 3:44 am

great. trhanks a lot.


73 Amitav Paul April 13, 2013 at 3:32 pm

I have never purchased or invested in any shares or egold or mutual funds. My earning is nominal and has no savings.Now I wish to invest a little amount in either egold or shares or mutual funds. Can you pliz help me where shall I invest to get a good return?
I would really appreciate if you can help me out in this for one time as I am a layman when it comes to investment. Thanks.


74 Manish Chauhan April 19, 2013 at 12:11 pm

In long term, only equity can deliver you good return or real estate


75 Karthikeyan May 21, 2013 at 11:43 pm

Manish, I tried out XIRR with my mutual fund investments and wanted your insight on some observations. One of my MFs is at a loss (i.e. current value is lower than principal). When I use XIRR, the value is lower than the actual return.

To quote an example, I invested in UTI Infrastructure in 2007-2008 in 13 SIPs of Rs. 2,500 each. The total investment is Rs. 32,500. The present value of my investment is Rs. 29,946. The absolute return is -7.86%. However, XIRR is coming to -1.64%.

Isn’t it misleading that XIRR is showing a lower negative return? Or am I not interpreting this result correctly? Please guide me.


76 Manish Chauhan May 25, 2013 at 5:35 pm

Can you also put the dates which you have put . Because IRR is the main return you got , not the absolute return .


77 Anand May 26, 2013 at 1:06 pm

Let me give an example.

If you invested 1000 Rs on 1-Jan-2009 and got 500 Rs only on your investment on 1-Jan-2013, then your absolute loss is 500 Rs i.e. 50%.

But if you calculate XIRR over the period, it comes out to be -15.90%
This is the loss every year.

Got it?


78 Manish Chauhan May 26, 2013 at 4:24 pm

Yes I got that Anand , but not sure what is your confusion ?


79 Anand May 27, 2013 at 1:40 am

I was trying to clear Karthikeyan’s confusion, not yours.
I learnt this from you only!


80 Anand May 22, 2013 at 5:52 pm

XIRR is showing the correct value. The value -1.64% is telling us that the value of investment is decreasing by 1.64% every year.


81 Manish Chauhan May 25, 2013 at 5:21 pm

Not decreasing, but what is the return till now !


82 ABC July 19, 2013 at 2:50 pm

Date Cash Flows
26/06/13 (160,488) 12.36% 12.94%
26/09/13 –
26/12/13 – IRR XIRR
26/03/14 –
26/06/14 –
26/09/14 –
26/12/14 –
26/03/15 –
26/06/15 –
26/09/15 –
26/12/15 –
26/03/16 –
26/06/16 –
26/09/16 –
26/12/16 –
26/03/17 7,134
26/06/17 7,293
26/09/17 7,293
26/12/17 7,213
26/03/18 7,134
26/06/18 7,293
26/09/18 7,293
26/12/18 7,213
26/03/19 7,134
26/06/19 7,293
26/09/19 7,293
26/12/19 7,213
26/03/20 7,194
26/06/20 7,273
26/09/20 7,273
26/12/20 7194
26/03/21 7,134
26/06/21 261643

In the said cash flows which are at regular interval we are getting different IRR and XIRR . The difference is quite significant…
Pls suggest


83 Manish Chauhan July 20, 2013 at 1:47 pm

The IRR assumes yearly payments


84 ABC July 19, 2013 at 2:57 pm

xirr is 12.94 and irr is 12.36%
When the cash flows are at a constant rate – quarterly.. thought certain quarters have no cash flows


85 Rahaman February 15, 2014 at 8:41 pm

Hi Manish,
How I can calculate final value using IRR/XIRR. E.g. the use case I have is, say I know the approximate IRR rate of one of my insurance policy is 6% & I am paying 10000/yr for 20 yrs. I want to get an idea how much my final return value would be. I tried some function NPV/FV in excel, but could not figure out..



86 Manish Chauhan February 21, 2014 at 12:05 pm

IRR is something which needs to be calculated backwords . 6% which you are assuming is just a scenario !


87 Abhijit March 10, 2014 at 1:31 pm

Simply awesome explanation. I didn’t look any other site after reading this article. I am trying to calculate XIRR of my MF portfolio.


88 Manish Chauhan March 12, 2014 at 4:57 pm

Thanks Abhijit !


89 DEBRAJ SENGUPTA April 11, 2014 at 11:39 am



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