CAGR and XIRR
Your actual yearly return: CAGR for a single investment, XIRR when you invested different amounts on different dates.
Your money earned 12.3% a year
XIRR across 4 cash flows: $15,000 in, $19,000 out or still invested. It weighs each amount by how long it was invested, so it’s comparable with a bank rate or a fund’s CAGR.
Money in: what you invested. Money out: what you took out, plus what it’s worth today.
CAGR: one investment, start to end
The steady yearly rate that turns the starting value into the ending value.
How this is calculated
CAGR assumes one amount in at the start and one value at the end.
Years can be fractional: 2.5 for two and a half years.
XIRR finds the one yearly rate at which all your dated cash flows balance out, counting days exactly. Enter investments as money in, and redemptions plus today’s value as money out.
r = 12.3%
It’s the same calculation spreadsheets use for XIRR.