How XIRR Work?
1. CAGR is one of the most significant measures for evaluating mutual fund schemes before investing. However, XIRR allows an investor to precisely compute the returns on his investment, which entails several transactions at irregular intervals.
2. If an investor is investing in mutual funds via SIP, utilize an online XIRR calculator to evaluate their performance. Alternatively, the investor may work with a financial advisor to create a mutual fund portfolio that aligns with his investing goals.
3. XIRR calculates the annualized return on investments by considering the cash flows in and out of the mutual fund investment at different points in time. These cash flows can be investments made by the investor, income earned from mutual fund investments, and withdrawals made by the investor.
4. The XIRR determines the interest rate that, when applied to your investment over time, would result in the same end value as your original investment. It accomplishes this by trial and error, evaluating several interest rates until it discovers one that yields the desired end result.