How is annualised return calculated with XIRR?
XIRR finds the one yearly rate r at which the value of everything you put in equals the value of everything you got back, with each cash flow discounted by how long ago it happened.
There's no formula that solves this directly, so the calculator searches for r: it uses Newton–Raphson (fast, usually a few steps) and falls back to bisection if that doesn't settle. It counts actual days over a 365-day year, the same convention as the XIRR function in Excel and Google Sheets, so the results should match a spreadsheet.
It also shows the simple total return: your gain divided by the money you put in. That ignores timing, which is exactly why the two figures differ.
XIRR vs CAGR vs time-weighted return
| Measure | What it answers | Use it when |
|---|---|---|
| CAGR | The yearly growth from one starting value to one ending value | There were no deposits or withdrawals in between |
| XIRR (money-weighted) | How your money did, including when you added or took it out | You want your own return, timing decisions included |
| Time-weighted return | How the investment did, ignoring the size and timing of your flows | Comparing a fund or manager against an index |
With a single deposit and no withdrawals, XIRR and CAGR are the same number. When you add money just before a rise, XIRR comes out above the time-weighted return; add it just before a fall and it comes out below. The guide to annualised return and XIRR goes through each in more detail.
Worked example
The pre-filled figures are illustrative: 10,000 invested in January 2021, 5,000 more in July 2022, 2,000 withdrawn in March 2024, 3,000 added in February 2025, and a value of 21,500 on 30 September 2026.
The simple return looks high because it treats the 3,000 added in 2025 as if it had been invested since 2021. XIRR weights each amount by the time it was actually invested. (The valuation date in the calculator starts at today, so your result for the same figures will drift slightly from this one.)
A simpler check: 10,000 growing to 15,000 over exactly five years is a CAGR of 1.5^(1/5) − 1 = 8.45%. XIRR gives 8.44%, because five calendar years include a leap day and XIRR divides days by 365.
Limitations
- It needs every cash flow, dated. Leave out a deposit and the return will look better than it was.
- Dividends you reinvested aren't cash flows: they're already in the current value. Dividends paid out to you are money out.
- Over periods shorter than a year, an annualised figure exaggerates: a 3% gain in two months annualises to about 19%.
- With unusual patterns (large withdrawals followed by more deposits), there can be more than one rate that fits, or none. The calculator shows n/a when it can't find one.
- It doesn't account for tax, inflation or currency movements.
Questions
What is a good annualised return?
It depends on what you hold and the period. Compare your XIRR with what a simple index fund in the same asset class returned over the same dates. That tells you more than any fixed number.
Why is my XIRR different from my broker's return?
Brokers often show a time-weighted return, or a simple return on cost, or exclude fees and income. XIRR reflects the timing of your own deposits, so it can be higher or lower. Make sure the cash flows and value date match what the broker used.
Is XIRR the same as IRR?
It's the same idea. IRR assumes cash flows at regular intervals (say, one per year); XIRR uses the actual date of each one, which is what real investing looks like.
Should I include dividends?
Yes, as money out if they were paid to you in cash. If they were reinvested, don't enter them: they're already part of the current value.
Can XIRR be negative?
Yes. If the current value plus withdrawals is less than what you put in, the annualised return is negative.
