Investing
XIRR explained
Why XIRR is useful for irregular investments and how it differs from a simple annualised return.
6 min read · Updated August 2026
The problem CAGR cannot solve
If you invest once and redeem once, CAGR is enough. Real portfolios have many SIPs, top-ups and partial withdrawals. XIRR finds an annualised rate that links all dated cash flows.
Sign convention
Investments are usually negative cash flows; redemptions/current value are positive (or vice versa—consistency matters). Wrong signs produce nonsense rates.
Limits
XIRR is a mathematical fit. It does not tell you whether risk was appropriate, and unusual cash-flow patterns can make interpretation harder.
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Educational content from Aaru Wealth. Not investment, tax or legal advice.