SampattiTrackXIRR (extended internal rate of return) is the single annual percentage return that makes all your dated investments and withdrawals add up, in today's terms, to the current value. Unlike a simple percentage gain, it accounts for when each rupee went in, which makes it the right measure for SIPs and any irregular investing.
Why a simple return misleads
Suppose you invested a total of ₹50,000 over time and your holding is now worth ₹55,000. The absolute return is 10%. But was that 10% over one year or five? And did you put the money in all at once, or in pieces? A ₹10,000 instalment that went in last month has barely had time to grow, while one from a year ago has had a full year. A simple percentage treats them identically.
This is the core problem with SIPs (systematic investment plans). Money goes in on many dates, so each unit of money works for a different length of time. You need a return measure that respects timing.
The intuition behind IRR
Internal rate of return asks: what constant yearly growth rate would turn all my payments into exactly the final value? Think of a savings account that grew at a steady rate. If you had put the same deposits on the same dates in that account and ended with the same balance, what interest rate would it have paid? That rate is the IRR.
IRR is a "money-weighted" return. Larger amounts and earlier amounts count for more, because they had more influence on the result.
From IRR to XIRR
Plain IRR assumes payments are evenly spaced, such as one per month. Real investing is not that tidy: SIP dates move around weekends, you add a lump sum, you withdraw some money. XIRR is the version that uses the actual date of each cash flow. It finds the rate r that solves:
Here CFi is each cash flow, di its date and d0 the first date. Money you invest counts as negative (it left your pocket); money you receive, including the current value of your holding, counts as positive. There is no neat algebraic answer, so software finds r by trial and refinement.
A worked example
You invest ₹10,000 every quarter, starting on 1 January 2025. On 1 April 2026 your holding is worth ₹55,000. Here are the cash flows, with the number of days since the first one:
| Date | Days since start | Type | Cash flow |
|---|---|---|---|
| 1 Jan 2025 | 0 | Invest | −₹10,000 |
| 1 Apr 2025 | 90 | Invest | −₹10,000 |
| 1 Jul 2025 | 181 | Invest | −₹10,000 |
| 1 Oct 2025 | 273 | Invest | −₹10,000 |
| 1 Jan 2026 | 365 | Invest | −₹10,000 |
| 1 Apr 2026 | 455 | Value of holding | +₹55,000 |
Total invested: ₹50,000. Final value: ₹55,000. Results:
| Measure | Result | What it tells you |
|---|---|---|
| Absolute return | 10.0% | Gain relative to money put in, ignoring time |
| Naive CAGR (all ₹50,000 treated as invested on day 0, 455 days) | 7.9% | Understates growth, because most money went in later |
| XIRR | 13.4% | Annual rate that matches the actual dates |
You can check the XIRR figure: discount each cash flow back to 1 January 2025 at 13.43% a year, using the formula above, and the total comes to (almost exactly) zero. The XIRR is higher than the naive CAGR because the later instalments were held for short periods, so the same ₹5,000 gain came from less money-time, meaning each rupee had to grow faster.
XIRR versus CAGR versus absolute return
- Absolute return is total gain divided by total invested. Simple, but ignores time.
- CAGR is the steady yearly growth between a start value and an end value. Best for a single lump sum with no cash in between.
- XIRR handles many dated cash flows, so it is the right choice for SIPs, top-ups and partial withdrawals.
For a one-time investment with no other flows, XIRR and CAGR give the same answer. They only diverge when there are several flows. A longer comparison is in XIRR vs CAGR vs absolute return.
Common pitfalls
- Short periods: XIRR is an annualised figure. A 5% gain in three months is annualised to about 21.6% (1.054 − 1), which is not a prediction that you will earn that for a full year. Treat XIRR over periods shorter than a year with caution.
- Missing cash flows: forgetting a dividend, a withdrawal or a switch changes the answer. Include every flow in or out.
- Wrong signs: investments and withdrawals must have opposite signs. If every number is positive or every number is negative, no rate exists.
- Stale final value: the end value must be the market value on the date you choose. Use the same date for both.
- Comparing unlike things: XIRR of a SIP is not directly comparable to the point-to-point return of an index over a calendar year. Compare against a benchmark using the same dates and the same cash flows if you can.
- Past, not future: a high XIRR describes what happened. It does not promise what comes next.
Key takeaways
- XIRR is the annual return that makes your dated cash flows equal the current value.
- It is the right measure for SIPs and irregular investments because it weighs each rupee by how long it was invested.
- In the worked example, ₹50,000 invested quarterly became ₹55,000: absolute return 10%, XIRR about 13.4%.
- For a single lump sum with no other flows, XIRR equals CAGR.
- Be careful with periods under a year, missing cash flows and wrong signs.
Frequently asked questions
What does XIRR stand for?
Extended internal rate of return. It extends IRR to cash flows that happen on irregular, specific dates.
Why is my XIRR different from my absolute return?
Absolute return ignores timing. XIRR annualises the result and weighs each amount by how long it was invested, so SIPs often show a different figure.
Is a high XIRR always good?
Not necessarily. Over a short period, a small gain can annualise to a very large number. Look at XIRR over longer periods and in context.
Can XIRR be negative?
Yes. If your holding is worth less than what you put in, the rate that matches your cash flows is below zero.
Putting it into practice
SampattiTrack tracks investment holdings for mutual funds, stocks and gold, shows allocation, handles SIPs and calculates XIRR from your actual transactions. You can bring in history by importing CSV statements from your bank or broker. Everything is stored on your device, with optional private iCloud sync and no sign-up. It is available on the App Store.
This article is for educational purposes only. It is not investment, tax, legal or financial advice. Examples use made-up numbers, and past returns do not predict future results.