Methodology — Money-Weighted Return (XIRR)

Transparency is a feature. This page explains what the money-weighted return measures and why we compute it — in plain terms. The precise formula and numeric conventions are documented in our internal methodology; the summary here is deliberate, not an omission.

Money-weighted return (XIRR)

The money-weighted return, often called XIRR, is the single annualized growth rate that reconciles all the dated cash flows of an investment — every deposit, withdrawal, and the ending value — with their exact calendar dates. It is the rate at which, given when money actually went in and came out, the investment would have had to grow to end up exactly where it did. Unlike a simple time-weighted return, it accounts for the size and timing of your contributions, so periods when more money was at work count for more. This makes it the honest answer to "what return did I actually earn?", since it reflects the decisions about when to add or remove capital, not just the performance of the underlying assets.

To read it: the result is expressed as a decimal fraction where a value of one-tenth means ten percent, it is already annualized (no separate annualization step is needed), and higher is better. By convention money you put in is treated as an outflow and money you take out (including the final balance) as an inflow. Dates are measured in actual calendar days, so leap days are counted — an investment held across a leap year spans a fraction more than a clean twelve months, which nudges the annualized rate very slightly. The order in which cash flows are supplied does not matter; the timeline is anchored to the earliest date in the data.

Honest limits

• It needs at least two cash flows, and there must be at least one inflow and one outflow — money both going in and coming out. Without a sign change there is no rate to solve for and the calculation cannot return a number.
• It is solved numerically by searching for the rate that balances the cash flows. In the rare cases where no sensible rate exists, the calculation reports that it could not converge rather than guessing.
• It is a single blended rate for the whole period; it summarizes the experience but does not tell you when within that span the gains or losses occurred.
• It is a historical measure of what was earned, not a forecast of future returns.