XIRR from Scratch: Newton-Raphson on a Portfolio
Part of the Sanchayam series. What XIRR Is XIRR (extended internal rate of return) is an annualized return that accounts for the timing of cash flows. Simple absolute return tells you what percentage you gained on an investment. XIRR tells you what annual rate of return is equivalent to the actual cash flows you made - buys, sells, and the current value - given exactly when each one happened. A 50% gain over 10 years is very different from a 50% gain over 2 years. XIRR captures that difference. It is the standard metric for evaluating the performance of an investment portfolio with irregular cash flows over time. ...