How IRR is calculated: money-weighted returns explained
The IRR (internal rate of return) is the yearly return that your deposits and withdrawals, each at its own date, would have needed to grow into your portfolio's current value. Mon Petit Portfolio calculates it with the XIRR method, the same one spreadsheets use. Because it weighs each euro by how long it was invested, it is the fairest measure of what you actually earned when you add money over time.
Why not the simple percentage gain?
A gain of 15% means little without a period: 15% in one year is excellent, 15% over ten years is poor. The percentage gain also ignores when the money came in. If you invested half your money two years ago and half a year ago, the second half has had only one year to grow, and the simple gain makes the whole portfolio look slower than it is.
How it works
Cash flows. Each deposit counts as money going in and each withdrawal as money coming out, on its own date.
Final value. The portfolio's market value on the last day counts as a final inflow, as if you sold everything.
The rate. The IRR is the yearly rate at which all those flows, discounted to the same date, add up to zero. It is found by successive approximation (Newton's method, with a slower fallback when that doesn't converge).
Buying and selling inside the portfolio are not cash flows: they move money from cash to an asset and back. Only money crossing the portfolio's boundary counts.
The portfolio's value is the market value of its holdings on each day, from each asset's closing price (or its last purchase price when no market price exists yet). The cash balance is not part of it, so money deposited but not yet invested lowers the IRR until it is.
A worked example
Date
Event
Amount
1 January 2024
Deposit
€1,000
1 January 2025
Deposit
€1,000
1 January 2026
Portfolio value
€2,300
Simple gain: €300 on €2,000 invested, or 15%.
CAGR from the first deposit: 15% spread over two years, about 7.2% a year. This understates the return, because the second €1,000 was only invested for one year.
IRR: about 9.7% a year. Growing at 9.7%, the first €1,000 becomes about €1,203 after two years and the second about €1,097 after one, which makes €2,300.
Yearly, quarterly and monthly IRR
The portfolio page also shows the IRR of each calendar year, quarter and month. For each period:
the portfolio's value at the end of the previous period counts as the opening outflow (zero for the first period),
deposits and withdrawals during the period count as before,
the value at the end of the period (or today, for the current one) is the closing inflow.
A period shorter than 3 days is too short for a meaningful annualised rate; it uses a simple time-weighted return instead.
Frequently asked questions
What is the difference between IRR and CAGR?
CAGR measures a single sum invested at the start. IRR weighs every deposit and withdrawal by its date, so it measures what an investor who added money over time actually earned. With a single deposit and no withdrawals, the two are equal.
Why is my IRR lower than I expected?
Check for deposits recorded with the wrong date or amount, and for money still sitting as cash: the cash balance isn't counted in the portfolio's value, so uninvested money weighs on the IRR.
Are dividends included?
Only through what you do with them. A dividend reinvested in an asset adds to the portfolio's value and so to the IRR. A dividend left as cash isn't counted.
Why is there no IRR for a recent portfolio?
The IRR needs at least two cash flows and a priced holding. A portfolio with no market value yet, or whose flows never change sign, has none.
Last checked against the code on October 15, 2026. Nothing on Mon Petit Portfolio is investment advice.