XIRR — Mutual Fund Term Explained

Extended Internal Rate of Return. The most accurate way to calculate SIP returns — accounts for the exact timing and amount of each cash flow.

XIRR (Extended Internal Rate of Return) is the annualised return rate that makes the net present value of all your cash flows equal to zero. The most accurate return metric for SIP investments.

Unlike CAGR (which needs a single start and end point), XIRR handles multiple irregular cash flows on different dates.

Formula

XIRR solves for r in: Σ[Cash Flow_i ÷ (1+r)^(date_i/365)] = 0

Example

₹1,000/month for 5 years via SIP, current value ₹85,000 → XIRR ≈ 12.5% per year.

Related terms

• CAGR — Compound Annual Growth Rate. Measures how much a lump sum investment grew per year on average. Not ideal for SIP returns — use XIRR instead.
• SIP (Systematic Investment Plan) — Investing a fixed amount in a mutual fund at regular intervals — typically monthly. Builds discipline and uses rupee cost averaging to reduce timing risk.
• Trailing Returns — Point-to-point returns calculated from today backwards. The most common return metric but sensitive to start/end dates.
• Absolute Return — Total profit or loss as a simple percentage, without annualising. Misleading for comparing across different timeframes.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.