Recently, I calculated the rate of return of my portfolio using the XIRR function in Excel. Specifically, I calculated the returns for every single year (2007, 2008, 2009, 2010, and 2011) and also over the entire time period (2007 – 2011). Here are the results that I obtained:

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`2007 6.57%`

2008 -43.02%

2009 40.46%

2010 19.27%

2011 -5.59%

2007-2011 3.79%

Then, I also calculated the geometric mean of the five annual returns and I attained the following result:

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`Geometric Mean -0.81%`

I was a bit surprised because I was expecting that the geometric mean (-0.81%) would be similar to the XIRR calculation (3.79%) over the entire time period (2007 – 2011).

Any help would be greatly appreciated. Thanks.