Calculating IRR (Internal Rate of Return) for your investments

In the last couple of days I have been trying to understand what IRR means and how one would calculate it. I could be wrong here, but, from my understanding, its a measure of effective rate of interest for your investments and is one of the factors to be accounted for when making investments.

I have first come across this here. Although, this explains how to calculate the IRR, the spreadsheet mentioned on that page is locked. Even if it were to be open for edit, I wouldn't be too comfortable sharing my investment details there. I have been looking online to find ways to calculate IRR and have realized its quite simple. Here is how you go about calculating it:

1. You'd need Microsoft office installed. But, if you are a free/open source user like me Open office would do equally good.

2. Open a spreadsheet, list your investments as. Column A: years, Column B: investment made.
* For all payments being made make negative entries i.e., if you are investing 50K during a year. The entry should be made as -50000. Any yielding returns should be made
as positive.

3. Use the in-built formula/function to calculate the IRR.
* A better tutorial for MS Office users is available here.

Hope that helps.

./M