XIRR

The spreadsheet function that computes an internal rate of return for cash flows on irregular dates, annualised on a 365-day year. It is the right measure for a SIP, a fund with uneven drawdowns or any portfolio where money went in and out at different times.

Say you put ₹1,00,000 in on 1 January 2024 and another ₹1,00,000 on 1 July 2024, and the holding is worth ₹2,20,000 on 1 January 2025. Your gain is 10% of the money invested. But half of it was invested for only six months, so the XIRR is about 13.4% a year.

Two cautions. First, signs matter. Money you invest goes in as negative, and money received or still held goes in as positive, or the function returns an error. Second, like any internal rate of return it's a money-weighted return, so it rewards the timing of contributions. A fund manager who doesn't control that timing is judged on the time-weighted return instead.

Dates in, annual rate out.