How return per annum is calculated? | Value Research If there are a number of purchases and sale in a year, you can use the IRR or XIRR formula in Excel sheet to calculate the annual returns
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How return per annum is calculated?

If there are a number of purchases and sale in a year, you can use the IRR or XIRR formula in Excel sheet to calculate the annual returns

Can you explain, with an example, how return per annum is calculated when there are more than one purchase and sale during the financial year? Also, is financial year considered as the annum in this case?
- D S Shahapurkar

You can use the IRR or XIRR formula in Excel to calculate the annual returns. The IRR formula is used when the investments are made at regular intervals. If investments are not made at regular intervals, you have to XIRR formula to calculate the returns.

Here is an example:

TransactionDate of transactionTransaction typeAmount
(₹)
HDFC Equity-G24/05/2011Buy-8000
Canara Robeco Equity Div. Reg-G27/07/2011Buy-8000
Canara Robeco Equity Div. Reg-G28/07/2011Buy-5000
HDFC Equity-G14/09/2011Buy-2000
ITC04/08/2015Buy-6760.81
HDFC Equity-G07/08/2015Sell18484.52
ICICI Pru Value Discovery Direct-G10/08/2015Buy-5000
Canara Robeco Equity Div. Reg-G24/09/2015Sell21481.31
ITC29/09/2015Sell6300.42

Since the investments are not made at regular intervals, we used the XIRR formula excel to obtain the rate of returns= 10.16%.

The formula gives an annualized return over the period defined by the dates. An XIRR return of 13.42% in the above example means that, at the current rate of return (since May 24,2011), you'd make 13.42% over the entire 365-day in a year.


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