XIRR
Also called: money-weighted return, extended internal rate of return
The yearly rate of return that accounts for the size and timing of every amount an investor put in or took out.
XIRR is a money-weighted return: it measures what the investor actually earned, given when they added and withdrew money. A time-weighted return, which fund factsheets report, measures how the investments performed regardless of cash flows.
The two can differ widely. Adding most of your money just before a fall gives a worse XIRR than the fund's own return. Spreadsheets calculate XIRR from a list of dated cash flows and the current value.
Example
A made-up fund gains 20% then loses 10%. An investor who puts in ₹1 lakh at the start and ₹4 lakh after the first year ends with ₹4.68 lakh, an XIRR of about −5.4% a year, while the fund's time-weighted return is about +3.9% a year.
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