Why Does XIRR in Mutual Funds Make Financial Sense?
1. The mutual fund industry uses XIRR, or the internal rate of return of mutual funds.
2. The performance of a mutual fund over a certain time period is estimated by mutual fund firms using internal rates of return. They are typically employed to project a portfolio’s performance or future returns.
3. The internal rate of return is determined initially, followed by a daily cash flow estimate and, at each period, the temporal value of money. This process yields the XIRR, which ultimately is helpful for investors.
4. An investment’s average return over a predetermined time is measured using an investment performance metric called XIRR.
5. The internal rate of return (IRR) of an investment over a specific time period is calculated using XIRR. The discount rate that brings the net present value (NPV) of all cash flows from an investment to zero is known as the internal rate of return (IRR).
6. It is used with assets like equities and mutual funds that don’t always have cash flows within a set time frame.