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
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)?