XIRR or extended internal rate of return is a measure of return used when multiple investments (at different points in time) are made in a financial instrument. A look at what XIRR represents and how it is different from CAGR. (View Highlight)
Here CAGR represents the year on year compounded growth and is known as compounded annualized growth rate (View Highlight)
Suppose I invest Rs. 12,000 once a year for 12 years and wish to know what is the average rate at which my investments have compounded year after year, the quantity that gives me information is the XIRR. (View Highlight)
That is each instalment is perceived to grow at the same CAGR. The aim is to adjust this common CAGR until the total value of all the investments becomes equal to 5,17,524 (View Highlight)
So our aim should be to adjust the CAGR until the total value of all the investments equals the actual total final value. (View Highlight)
