What is XIRR and its Meaning in Mutual Funds?

XIRR, or Extended Internal Rate of Return, is a powerful financial metric that assesses the performance of investment funds. The XIRR estimates the annualized return on periodic as well as irregular investments with multiple cash flows. Unlike traditional metrics like the CAGR, XIRR is more accurate as it considers the exact timing and amount of cash flows. In this article, we will explore how XIRR can help you make informed decisions and have a better understanding of the returns generated by investments in your ULIP and mutual funds.^^

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XIRR Full Form

XIRR stands for Extended Internal Rate of Return. It is a method used to calculate the returns on investments where there are multiple transactions happening at different times. This is in contrast to the Compound Annual Growth Rate (CAGR), which is only applicable to investments with a single cash flow.

XIRR is commonly used to calculate the returns on Systematic Investment Plans (SIPs) in the following investment options:

  • Unit Linked Insurance Plan funds ( or ULIP funds)

  • Mutual Funds

A SIP is a method of investing a fixed amount of money in an investment fund every month. There is an online SIP calculator to get the estimated returns on SIP investment. As there are multiple cash flows happening at different times, making it difficult to calculate the returns using CAGR.

To calculate XIRR in a mutual fund or ULIP fund, you need to know the following information:

  • Monthly Investment Amount

  • Date of Each Investment

  • NAV of the ULIP Fund/ Mutual Fund on the Date of Each Investment

  • Insurance Companies
  • Mutual Funds
Fund Name 3 Years 5 Years 10 Years
Top 200 Fund Tata AIA 26.56% 26.54%
View Plan
Virtue II PNB Metlife 24.33% 22.69%
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Pure Equity Birla Sun Life 22.64% 18.83%
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Growth Opportunities Plus Fund Bharti AXA 19.93% 18.63%
View Plan
Pure Stock Fund Bajaj Allianz 19.11% 17.33%
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Blue Chip Fund HDFC Standard 15.73% 14.59%
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Growth Super Fund Max Life 16.34% 15.13%
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Multi Cap Growth Fund ICICI Prudential 17.16% 13.44%
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Equity Fund SBI 16.39% 14.54%
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Equity II Fund Canara HSBC Oriental Bank 15.5% 12.24%
View Plan

Updated as on February 2024

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Fund Name 5 Years 10 Years RSI
Active Fund QUANT 27.80% 23.96%
Large and Mid Cap Fund QUANT 23.27% 22.69%
Flexi Cap Fund PARAG PARIKH 23.90% 20.22%
Large and Mid Cap Fund EDELWEISS 20.32% 18.01%
Equity Opportunities Fund KOTAK 20.22% 18.98%
Large and Midcap Fund MIRAE ASSET 21.11% 24.56%
Flexi Cap Fund PGIM INDIA 21.48% -
Flexi Cap Fund DSP 19.48% 17.73%
Emerging Equities Fund CANARA ROBECO 18.91% 22.92%
Focused fund SUNDARAM 18.22% 16.55%

Updated as on March 2024

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Why Calculate XIRR in a Mutual Fund/ ULIP Fund?

It is essential to calculate XIRR in a mutual fund and ULIP fund for several reasons, some of which are as follows:

  • To Get a More Accurate Measure of Your Returns: In the case of ULIP funds and mutual funds, you may invest in lump sums or through SIPs, which involve multiple cash flows happening at different times. XIRR takes into account the timing of all the cash flows, which gives you a more accurate measure of your returns.

  • To Compare the Returns of Different Investments: If you compare the returns of two mutual funds or two ULIP funds, one with lump sum investment and the other with SIP investment, you cannot use CAGR to do this. This is because the two funds will have different cash flow patterns. XIRR can be used to compare the returns of various best investment options, regardless of their cash flow patterns.

  • To Track the Performance of Your Investments Over Time: XIRR can be used to track the performance of your investments over time, even if you have made multiple withdrawals or investments. This can help you to make necessary adjustments to your investment strategy.

  • To Make Better Investment Decisions: By understanding the XIRR of your investments, you can make better investment decisions. For example, if you are investing for a long period, you may be willing to accept a lower XIRR in exchange for lower risk.

People Also Read: XIRR Calculator

How Does XIRR Work?

XIRR calculates the interest rate that, when applied to your investment over its duration, would yield the same final value as your actual investment. It does this by trial and error, testing different interest rates until it finds one that produces the desired ending value.

XIRR Formula:

XIRR = (NPV(Cash Flows, r) / Initial Investment) * 100


  • NPV = Net present value of the cash flows

  • R = Interest rate

  • Initial Investment = Invested Amount

  • Cash Flows = Amounts invested and withdrawn over the period of the investment

Illustration of XIRR Formula:

Suppose you make investments as per the following details:

  • Deposit Amount on 01 January = Rs. 10,000

  • Withdrawal Amount on 01 July = Rs. 2,000

  • Balance Amount on 31 December = Rs. 11,000

The XIRR for this investment would be about 10%

Explanation: The XIRR value means that if you had invested Rs. 10,000 at the beginning of the year and compounded it at 10% interest, you would have ended up with Rs. 11,000 at the end of the year.

How to Calculate XIRR in Excel?

Follow the steps mentioned below to calculate the XIRR in a Mutual Fund or a ULIP Fund using MS Excel:

Step 1: Enter the cash flows in a column in Excel. The cash flows should be in chronological order, with the dates in the first column and the amounts in the second column.

Step 2: Select the cell where you want to display the XIRR.

Step 3: Type the following XIRR formula and press "Enter":

= XIRR (cash flows, dates)


  • Cash Flows: The range of cells that contain the cash flows

  • Dates: The range of cells that contain the dates of the cash flows

Step 4: Excel will calculate the XIRR and display it in the selected cell.

People Also Read: Best SIP Plans

What are the Benefits of Calculating XIRR in a Mutual Fund/ ULIP Fund?

The key benefits of calculating XIRR in a mutual fund or a ULIP fund are listed below:

  • Accuracy: XIRR is a more accurate measure of returns than CAGR because it considers the timing of all the cash flows. This is important for ULIP and mutual funds, where you typically make multiple investments over time.

  • Consistency: XIRR is a consistent measure of returns, even if the cash flows are irregular. This is in contrast to CAGR, which can be misleading if the cash flows are irregular.

  • Flexibility: XIRR can be used to calculate the returns of any investment, regardless of the cash flow pattern. This makes it a versatile tool for measuring investment performance.

  • Transparency: XIRR is a transparent measure of returns, as it is based on the actual cash flows. This makes it easy for you to understand how your investments are performing.

  • Relevance: XIRR is a relevant measure of returns for ULIP funds and mutual funds, as it considers the fees and expenses associated with these investments. This makes it a more accurate estimate of the actual returns that you can expect to earn.


The key differences between XIRR and CAGR are mentioned in the table below:

Full form Extended Internal Rate of Return Compound Annual Growth Rate
Calculation It considers the exact timing and amount of cash flows, making it suitable for irregular investments and withdrawals. It assumes a constant rate of growth over a specified period, regardless of cash flow timing.
Applicability Applicable on investments with multiple cash flows Applicable on investments with a single cash flow
Accuracy Provides a more precise measure of investment performance by accounting for cash flow timing. It may not accurately reflect the actual performance if there are irregular cash flows.
Flexibility It can be used to calculate the returns of any investment, regardless of the cash flow pattern. It can only be used to calculate the returns of investments with a single cash flow.

Wrapping It Up

XIRR (Extended Internal Rate of Return) is a valuable metric for evaluating the performance of ULIP and mutual funds. It provides you with a comprehensive view of your returns, accounting for the timing and amount of your investments. By considering both inflows and outflows, XIRR offers a more accurate representation of an investment fund's performance, helping you to make informed decisions about your investments.


  • What is a good XIRR rate?

    The definition of a good XIRR rate depends on a number of factors, including the asset class, the investment horizon, and your risk tolerance. However, as a general rule of thumb, an XIRR of 11-12% is considered good for equity funds, and 7-8% is considered good for debt funds.
  • Is XIRR better than CAGR?

    XIRR is considered to be a better measure of investment returns than CAGR, especially for investments with irregular cash flows, such as SIPs. However, CAGR is easier to calculate and understand, so it is often used as a more general measure of investment performance.
  • What is the formula for XIRR?

    The XIRR formula is: XIRR(values, dates, [guess])


    • Values: An array of cash flows, where a negative value represents an outflow and a positive value represents an inflow.

    • Dates: An array of dates corresponding to the cash flows.

    • Guess: An optional argument that provides an initial guess for the XIRR. If omitted, Excel will use a default value of 10%.

  • What is the major difference between IRR and XIRR?

    The major difference between IRR and XIRR is that IRR assumes that all cash flows in your investment fund occur at the end of the period, while XIRR takes into account the actual timing of the cash flows. This makes XIRR a more accurate measure of the true returns of an investment, especially for investments with irregular cash flows.

+For Mutual Fund midcap category Returns https://www.morningstar.in/tools/mutual-fund-category-performance.aspx & for Insurance midcap fund category Returns- https://www.morningstar.in/tools/insurance-fund-category-performance.aspx
*Past 10 Year annualised returns as on 01-12-2023
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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