When using XIRR to calculate the performance of a stock trading account, do you need to have a beginning cash flow equal to the starting balance of the account (seed money) ?
When I do that, it throws the formula completely for a loop and I either get errors because it can't calculate the return, or the return is very, very negative despite the account actually increasing in value over the year.
$7,000 starting balance/seed money, entered as a negative, January 1st
$6,800 invested in a trade, January 2nd
$8,000 deposited from closing the trade, December 22nd.
The ROIC on the trade would be 17.6%, and the MWRR should be about 17.1%, +/- 1% since the investment period was slightly less than a full year.
But XIRR is returning -43%?! If I tell XIRR to ignore the seed money, and only look at the amount invested in the trade and the amount received when closing the trade, I get just over 18%, which seems right.
What am I not understanding about XIRR? I thought all IRR needed to include the seed money?