XIRR is a way to express performance when money goes in and out on uneven dates. Ordinary IRR assumes evenly spaced periods. XIRR uses the actual calendar dates of each contribution and withdrawal. Spreadsheet functions iterate to find the rate that sets the present value of all flows to zero.
Key takeaways
- Use XIRR when you invest lump sums at different times rather than one single deposit.
- The result is sensitive to the dates and amounts you enter. Bad inputs produce a misleading rate.
- XIRR can fail to find a unique answer for unusual cash flow patterns.
- It measures the path of your personal cash flows, not a guarantee of future returns.