What is the difference between XIRR and CAGR?

CAGR measures the annualised growth of a single lump sum between two dates. XIRR handles multiple contributions and withdrawals on different dates, weighting each by its time invested. Use CAGR for a one-time investment and XIRR for a SIP or any irregular pattern.

What is a good XIRR for a SIP?

It depends entirely on the asset class and period. Diversified Indian equity funds have historically produced long-run returns in the low-to-mid teens, but any specific multi-year window can be well above or below that. Compare a fund's XIRR against its benchmark and its category, not against a fixed target.

How do I calculate XIRR?

Spreadsheets have it built in: list every investment as a negative amount with its date, add the current value as a positive amount on today's date, and apply the XIRR function. Most portfolio trackers and fund platforms compute it for you.

Can XIRR be negative?

Yes. If the current value of your holding is below the money you have put in, XIRR is negative. Over short periods in equity funds this is entirely normal and says little about the long-run outcome.

Investing

XIRR

Also known as: Extended Internal Rate of Return, money-weighted return

XIRR is the annualised return on an investment with irregular cash flows — the correct way to measure what a SIP has actually earned.

CAGR assumes a single amount invested once and left alone. That describes a lump sum, not a SIP. When money goes in every month, each instalment has been invested for a different length of time, and a simple average of gains overstates or understates the real result depending on when the money went in.

XIRR solves this by finding the single annualised rate that makes all those dated cash flows add up to the present value of the holding. Every contribution is weighted by how long it has actually been working, which is why XIRR is the figure fund houses and portfolio trackers report for SIP performance.

A worked intuition helps. If you invest ₹5,000 a month for five years, your last instalment has been invested for one month and your first for sixty. Dividing total gain by total invested treats those identically and produces a number that means very little. XIRR does not.

Because XIRR is money-weighted, it reflects your timing as well as the fund's performance. Two investors in the same fund can post different XIRRs if one increased contributions before a strong run and the other did not — which makes it the right measure of your outcome, but not of the fund's skill.