Both numbers answer the same question — “what yearly rate did my money grow at?” — but they fit different money-shapes. CAGR handles one amount that goes in once and comes out once. XIRR handles everything with multiple flows: monthly SIPs, top-ups, partial withdrawals. Use the wrong one and the answer quietly lies.
CAGR: the two-point measure
CAGR needs exactly three facts: start value, end value, years. It assumes a single investment, held the whole time, nothing added, nothing removed. That makes it perfect for a lump-sum fund purchase, a plot of land, gold bought on one day — and useless for a SIP, where the money inside has been invested for very different lengths of time. Read the full CAGR lesson.
XIRR: the measure for many dates
XIRR — extended internal rate of return — takes every cash flow with its date (outflows negative, inflows positive) and finds the single yearly rate that makes the whole history add up to today's value. Your last SIP instalment has barely had time to grow; your first has years of compounding. XIRR weighs each one correctly.
Excel and Google Sheets ship it as XIRR(): a column of dates, a column of amounts, the current value as the final inflow — and the answer appears.
The honest rules of thumb
One deposit in, one amount out: CAGR. Anything with instalments, top-ups or withdrawals: XIRR. Comparing a SIP against a lump sum: convert both to their own number first — never compare a fund's CAGR to your SIP's XIRR, because they measure different things.
And whichever number you use, ask what it isn't saying: neither shows volatility along the way, fees are already inside, and past versions of either are not promises.
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Message IFI on WhatsApp →Quick recap
- CAGR fits single lump-sum investments measured between two dates.
- XIRR fits anything with multiple flows — SIPs, top-ups, SWPs.
- Never compare a fund's CAGR against your SIP's XIRR.
- Both are backward-looking; neither predicts the next decade.
Frequently asked questions
What is XIRR in simple words?
XIRR is the yearly growth rate that makes a series of dated cash flows - like monthly SIP instalments plus today's value - mathematically add up. It is the correct return figure for SIPs, top-ups and withdrawals.
Why can't I use CAGR for a SIP?
CAGR assumes one investment held the whole period. In a SIP, each instalment has been invested for a different length of time, so a single two-point calculation misprices most of the money.
Which is higher, XIRR or CAGR?
Neither leads by definition - XIRR accounts for the timing of every rupee while CAGR uses only endpoints. On the same money they can differ meaningfully in either direction.
Where do I find my SIP's XIRR?
Most broker and fund-house apps show it as the investment's return. In a spreadsheet, use the XIRR() function with dates, amounts (instalments negative) and the current value as the final positive entry.