Internal Rate of Return

IRR represents the annual growth rate on a project or investment. It’s more useful than Return on Investment (ROI) since ROI does not take into account the timeframe in which your money is spent away from your pocket.

For example, a 50% ROI sounds amazing. But a 50% ROI over a 20 year period isn’t very impressive. In contrast, a 15% IRR takes into account the entire investment period, and the opportunity cost of your money each year.

It’s not a very straightforward concept, so check out this Investopedia definition.