What is XIRR?
XIRR stands for **Extended Internal Rate of Return**. It is a financial function widely used to calculate the annualized return of a series of irregular cash flows over time. Unlike the regular IRR, which assumes all cash flows are spaced equally (like monthly or annually), XIRR handles actual dates for each cash flow — making it ideal for real-world scenarios such as investments with multiple deposits and withdrawals at different points in time.
Why is it useful?
XIRR gives investors and analysts a precise way to measure the true annualized performance of an investment when contributions and redemptions do not occur at regular intervals. For example, if you invest different amounts at different dates and withdraw parts of your investment later, XIRR calculates the single annual rate of return that equates your total inflows and outflows over time.
How is it used for single and multiple stocks?
When calculating the XIRR for a **single stock**, it is common and more intuitive to **extend the end date to the end of the calendar year**. This projects the unrealized value forward to provide a comparable annualized return figure for the full year, even if you haven’t sold the stock yet.
Similarly, for a **portfolio with multiple stocks**, you track all cash flows — buys, sells, dividends — with their actual dates, then extend the final balance to a common end date, usually the year-end. This gives you an annualized return for the entire portfolio that you can compare against benchmarks or other investments.
Strong for tracking multi-year performance
One of XIRR’s biggest strengths is its ability to **combine performance across multiple years** into a single **compound annual growth rate (CAGR)**. This means that even if you hold stocks for many years with varying purchases, dividends, or partial sales along the way, XIRR shows your true annualized return over the whole period, factoring in the exact timing of every cash flow. This makes it far more realistic than simply looking at average yearly returns.
Where is it used?
XIRR is commonly used in personal investing, portfolio performance tracking, private equity, venture capital, and fund management. It is a standard function in spreadsheet tools like Microsoft Excel and Google Sheets, where you simply provide the actual cash flow dates and amounts to calculate your annualized return.
Example of a Single Stock
Even today is not last day 31st Dec 2025, when computing XIRR YTD, use 31st Dec 2025. In that way you will get return of more logical 1% instead of 5.3%.
Example of using Year End Date.
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Disclaimer: The articles presented in this blog reflect personal opinions and are intended for informational and sharing purposes only. Not responsible of errors. Readers are advised to seek professional guidance when making financial decisions and should take full responsibility for their choices.
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