Do you have an investment that has the following characteristics?
- Fluctuating interest rate
- Irregular investment intervals
- Irregular withdrawal intervals
If you do, my next question is, do you know how to determine the average annual return on your investment so you can compare the rate of return to other investments?
If you answered, "yes, by using the XIRR Function in a spreadsheet", then to you I say congratulations!
On the other hand, if the mere thought of trying to determine the rate of return on this type of an investment gives you an instant headache, then you're going to love the calculator on this page.
Simply enter the date and amount of the initial investment, then the dates and amounts of all subsequent investments and withdrawals, then click the "Calculate XIRR" button.
How the XIRR Calculator Works
The XIRR Calculator uses a trial and error method of determining the rate of return for a non-periodic schedule of investments and withdrawals -- which is similar to the XIRR function used in spreadsheet applications such as Excel™, OpenOffice Calc, GoogleDocs, etc.
Specifically, this calculator begins by assuming the annual rate of return is -100%, and then increases the rate of return by 1% until the combined future value of the cash flows is greater than zero.
From there the calculator keeps subtracting .0001% from the "guess" until the combined cash flows is within +/- $0.50 of zero.
Up To 100,000 Tries!
Each time the calculator adjusts the guess and recalculates the combined future values of all cash flows, this is referred to as one iteration or one try. Believe it or not, the calculator will perform up to 100,000 of these iterations before it stops trying to find an acceptable solution.
Plus, unlike other online XIRR calculators, this calculator will even display a printable chart showing the future value of each cash flow -- which will help confirm or deny the validity of the calculated internal rate of return.
Finally, if you're not sure what is meant by "Internal Rate of Return" (IRR), please visit the "Learn" tab on the IRR Calculator for an explanation.