Thank you for your replies. I greatly appreciate it.

Just to clarify a few points:

- Yes, I am in the accumulator phase and have been adding money during this time period (2007 – 2011).

- The XIRR figures are annualized returns.

I am still a bit confused about the overall returns using the two different methods. First, by utilizing the XIRR method to calculate the portfolio return from 2007 to 2011 I obtain an annualized value of

**3.79%**. My understanding is that this calculation accounts for the external cash flows.

On the other hand, when I can calculate the returns for every single year using the XIRR function I get the following numbers, which also account for the external cash flows.

Code: Select all

```
2007 6.57%
2008 -43.02%
2009 40.46%
2010 19.27%
2011 -5.59%
```

Now, in order to calculate the average return (annualized) for these five yearly returns I take the geometric mean and obtain a return of

**-0.81%**.

I still don’t understand why the two values from these two methods (3.79% vs. -0.81%) are not equivalent. Which value provides the correct return for the overall time period (2007 – 2011)?