XIRR vs. CAGR: Which is the Best Way to Measure Your SIP Returns?

Many investors look at the 'Absolute Return' or 'CAGR' of their mutual fund portfolio and get a distorted view of their performance. If you are investing via SIP (irregular cash flows at different intervals), CAGR is the wrong metric. You need XIRR.

What is XIRR?

XIRR stands for Extended Internal Rate of Return. It is a method used to calculate the rate of return when multiple investments are made over a period of time. It accounts for the 'Time Value of Money' for every single installment.

XIRR vs. CAGR Example

If you invest ₹1 Lakh today and it becomes ₹1.5 Lakh in 3 years, your CAGR is ~14.5%. But if you invested that ₹1 Lakh in 12 monthly installments, your first installment worked for 3 years, while your last one worked for only 2 years. XIRR adjusts for this complexity.

Why Use XIRR?

• It's the most accurate for SIPs, SWPs, and Lumpsum+SIP combos.

• It allows you to compare different mutual funds accurately.

• Most banking and broking apps (like Zerodha leading apps) use XIRR to show you your 'Personalised Return'.

Verdict: To be a serious investor, you must track your XIRR. Use our tool to find out your true wealth creation speed today.