XIRR, explained
XIRR (Extended Internal Rate of Return) is the annualised return for investments with multiple cash flows on different dates — exactly the case with a SIP, where you invest every month at different NAVs.
Why not CAGR?
CAGR assumes a single lumpsum at the start and a single value at the end, so it can’t correctly measure a SIP. Each SIP instalment has been invested for a different length of time — XIRR accounts for that timing; CAGR does not.
XIRR vs absolute return
Absolute return is just total gain ÷ invested, ignoring time. A 40% absolute return over 5 years is very different from 40% in 1 year — XIRR turns both into a comparable annual figure. For a lumpsum held over whole years, XIRR and CAGR match.
Where you see it
Your portfolio statement usually shows SIP returns as XIRR. To project a SIP goal, use our SIP calculator; for a lumpsum, the CAGR calculator.
Frequently asked questions
What is XIRR in mutual funds?
XIRR is the annualised return for investments made at different dates (like a SIP). It accounts for the timing of each instalment, which CAGR cannot.
What is the difference between XIRR and CAGR?
CAGR assumes one lumpsum from start to end; XIRR handles multiple cash flows on different dates. Use XIRR for SIPs, CAGR for a single lumpsum.
What is a good XIRR?
It depends on the asset and period — there’s no fixed number. Compare a fund’s XIRR to its benchmark and category over the same timeframe.