What is XIRR (and how it differs from CAGR)?
XIRR is the true annualised return when you invest at different times — the right metric for SIPs and irregular cashflows.
XIRR — the Extended Internal Rate of Return — is the single annualised return rate that accounts for every cashflow happening on a different date. It is the most honest way to measure how your SIP or any irregular investment has actually performed.
Why a simple return is misleading
Imagine you invested ₹10,000 every month for three years. Some of that money compounded for 36 months; the instalment you paid last month compounded for just one. A plain "total gain ÷ total invested" ignores when each rupee went in, and overstates or understates your real rate.
XIRR fixes this by finding the rate r that makes the present value of all your investments equal to the present value of all your withdrawals (and current balance).
XIRR vs CAGR
| CAGR | XIRR | |
|---|---|---|
| Cashflows | One in, one out | Many, on any dates |
| Best for | Lump sums | SIPs, top-ups, partial redemptions |
| Inputs | Start value, end value, years | Every dated cashflow |
CAGR assumes a single investment and a single redemption. The moment you add monthly SIPs, step-ups, or partial withdrawals, CAGR can no longer describe your return — and XIRR becomes the correct tool.
A quick example
- 12 monthly SIPs of ₹10,000 (₹1,20,000 invested)
- Current value after one year: ₹1,32,000
Your absolute gain is 10%, but because most instalments were invested for less than a year, your XIRR is meaningfully higher than 10% — roughly 18–19% annualised.
How to read your XIRR
- Compare like with like. Benchmark a fund's XIRR against its category and a relevant index over the same window.
- Mind the window. A great 1-year XIRR during a bull run is not a long-term expectation.
- Don't chase. A high XIRR earned through luck or timing rarely repeats.
Where to use it
Most portfolio trackers and AMC statements report XIRR for your folios. When you plan future contributions, model them with our SIP calculator or compare strategies with SIP vs Lumpsum.
Bottom line: Use CAGR for one-shot investments and XIRR for anything with multiple, dated cashflows. For SIP investors, XIRR is the number that matters.