Investment
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CAGR vs XIRR
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Two return metrics, two completely different answers. Learn why XIRR is what actually matters for SIP investors.
Visual Comparison
Key Differences
| Feature | CAGR | XIRR |
|---|---|---|
| Measures | Lumpsum point-to-point return | Return on irregular cash flows |
| Best for | One-time investments, benchmarks | SIPs, redemptions, dividends |
| Considers timing | No | Yes — exact date of each cash flow |
| Can handle SIP? | No (misleading result) | Yes — this is the right metric |
| Formula | (End/Start)^(1/n) – 1 | IRR of dated cash flows |
When to Choose Which
Choose CAGR
- Comparing two investments over same period
- Evaluating a lumpsum investment
- Benchmarking against index returns
- Quick portfolio growth estimation
Choose XIRR
- Calculating SIP portfolio actual returns
- Any investment with multiple cash flows
- Comparing funds with different SIP histories
- Real-world return measurement
Frequently Asked Questions
CAGR measures point-to-point growth of a lumpsum. XIRR accounts for the exact timing of each cash flow, making it accurate for SIPs and irregular investments.
Because you invested at different NAVs over time. XIRR reflects YOUR actual return; fund CAGR reflects the fund’s overall return from a fixed date.
XIRR is more accurate for real-world return calculation when multiple investments or withdrawals are involved.
Yes. 12% XIRR on equity SIP over 10+ years is considered a solid inflation-beating return.
Use Excel’s =XIRR(values, dates) function. Enter all SIP amounts as negative (outflows) and the current portfolio value as positive (inflow) on today’s date.