CAGR vs XIRR vs absolute return: which number to use
Aeterna Wealth · figures from our fund data, updated 12 Nov 2026
Absolute return is the total gain as a percentage, ignoring time. CAGR is the steady yearly rate that turns your starting amount into the ending amount: use it for a single lump sum. XIRR does the same for money that went in (or out) on different dates, like a SIP: it is the right measure for your own portfolio.
A worked example
- ₹1 lakh invested once, worth ₹2 lakh after 6 years: absolute return 100%; CAGR about 12.2% a year.
- ₹10,000 a month for 3 years (₹3.6 lakh in), worth ₹4.4 lakh: absolute return 22%, but the average rupee was invested for only about 18 months, so the XIRR is about 13.5% a year.
Which to use
- A fund's 3-year or 5-year return: CAGR (as on every fund page).
- Your SIP or a portfolio with many purchases and withdrawals: XIRR.
- Under a year: absolute return, since annualising a few months exaggerates.
Common questions
Why is my SIP return different from the fund's return?
The fund's return is a CAGR from one date; your SIP's XIRR depends on when each instalment went in and what the market did afterwards.
Is a higher XIRR always better?
It is the true rate on your money, but compare it with what the same cash flows would have earned in the fund's index.
How do I calculate XIRR?
Spreadsheet XIRR function with each investment as a negative amount and today's value as a positive one, with their dates; or use our SIP calculator.
Want this worked out for your money?
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General information, not investment or tax advice for your situation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
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