How Withdrawals Affect Your XIRR
"I sold some shares at a profit, but my XIRR went down!" — Here's why that makes perfect sense.
🤔 The Confusion
You sold a stock at profit. Your bank balance increased. But your app now shows a lower XIRR. Did the app break?
No — this is how XIRR is supposed to work.
XIRR 101: It's About Timing, Not Just Profit
XIRR (Extended Internal Rate of Return) measures your annualized return considering when money went in and out. It's not just "profit divided by investment."
When you withdraw money, you're fundamentally changing the cash flow timeline. This can increase or decrease your XIRR depending on timing.
Example: Why Selling at Profit Can Lower XIRR
Scenario: Portfolio Before Withdrawal
| Date | Action | Amount |
|---|---|---|
| Jan 2023 | Invested | -₹1,00,000 |
| Dec 2024 | Current Value | +₹1,40,000 |
XIRR: ~18.3% (money growing for 2 years)
Scenario: After Partial Withdrawal
| Date | Action | Amount |
|---|---|---|
| Jan 2023 | Invested | -₹1,00,000 |
| Jun 2024 | Withdrew (profit booking) | +₹50,000 |
| Dec 2024 | Current Value | +₹70,000 |
XIRR: ~15.8% (money left portfolio earlier)
💡 What Happened?
Total return is still ₹20,000 profit. But when you withdrew ₹50,000 mid-way, that money stopped compounding. XIRR accounts for this — your effective annual growth rate is lower because part of the money "left early."
When Withdrawals INCREASE Your XIRR
Withdrawals don't always lower XIRR. If you withdraw money that was about to lose value, your XIRR goes UP:
- Selling before a crash — Money that exits before losses = higher XIRR
- Profit booking in a volatile stock — Locking in gains can improve XIRR
- Rebalancing out of underperformers — Moving money to better stocks helps
Why This Matters for Your Portfolio
✅ Good Insight
XIRR tells you the true rate at which your money grew, accounting for when you actually had it invested. It's honest.
⚠️ Don't Panic
A lower XIRR after withdrawal doesn't mean you made a bad decision. You still made a profit — just track both your absolute gains AND XIRR.
How to Track Withdrawal Impact
- Compare before/after — Calculate XIRR with and without the withdrawal
- Check timing — Was withdrawal near market peak or bottom?
- Use TrueXIRR — See exactly which transactions affected your returns most
See How Withdrawals Affected Your XIRR
Upload your tradebook and understand exactly how each sell impacted your returns.
Analyze My Portfolio →