How does xirr work

You can put a lump-sum amount in a mutual fund. You have a one-time redemption where you sell the entire investment after some time. Investing through a lump sum involves two cash flows. You have a cash outflow which is your investment, and a cash inflow redemption. You may consider using CAGR to calculate the return if you invest a lump-sum amount in a mutual fund scheme.

However, you may invest in mutual fund schemes through the SIP or redeem units through the systematic withdrawal plan SWP. It involves multiple cash flows, and you cannot use CAGR to determine returns from the mutual fund. If you want to follow along with this tutorial, download the example spreadsheet.

It is your guess at the internal rate of return. Note When entering the cash flow values, the value that is dated at the beginning of the investment must be negative. The cash flow values can be listed in any chronological order because the corresponding date is provided. These must include at least one negative value representing outgoing payment and at least one positive value representing income.

Therefore, subsequent dates must be later than the first date. Note: the [guess] is only a value for Excel to start off working with - Excel then uses an iterative procedure to converge to the XIRR. Formulas: A B C D 1. Results: A B C D 1. The Excel NPV function is a financial function that calculates the net present value NPV of an investment using a discount rate and a series of future cash flows.

The Excel IRR function is a financial function that returns the internal rate of return IRR for a series of cash flows that occur at regular intervals. The Excel MIRR function is a financial function that returns the modified internal rate of return MIRR for a series of cash flows, taking into account both discount rate and reinvestment rate for future cash flows.

The Excel XNPV function is a financial function that calculates the net present value NPV of an investment using a discount rate and a series of cash flows that occur at irregular intervals. Skip to main content. Calculate internal rate of return for irregular cash flows. Return value. Default is 0. Excel Usage notes. Example In the example shown, dates are in the values are in the range B5:B10, and dates are in the range C5:C