Ch.10 · Risk Measures and Ratios · hard
What is XIRR and when is it used for mutual fund return calculation?
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EXPLANATION
XIRR (Extended Internal Rate of Return) is used to calculate returns when there are multiple cash flows at different times — like SIP investments. Since each SIP instalment is invested at different NAVs and for different periods, CAGR cannot be applied directly. XIRR gives the annualised return accounting for the timing of each investment and redemption.
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