Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
I have 70K at the beginning of the year invested in some fund with the below yield each month, is it correct that the IRR would be 50.90%? What am I missing? In some article that I've read, they were doing the same table, and got:
Monthly TWR = 0.76%, Yearly TWR = 9.57%
Monthly IRR = 0.56%, Yearly IRR = 6.96%
the TWR is the same, but the IRR I've got is much higher.
You're treating the unrealized gains as cash flows, so you're double-counting them when you calculate the XIRR. In other words, from an XIRR standpoint, in month two it looks like you took 5,600 out of the fund (a positive cash flow to you) and the fund grew to 76,600, for a net TWR of 17%. Overall, it looks like you took 10,756 out of the fund over 12 months and the fund grew by 16,250.
The monthly unrealized gains are accounted for in the last cash flow to liquidate the account. If you use the actual cash flow of -1000 for each month (other then the first and last), you'll get the correct XIRR of 6.96%.
