CAGR vs XIRR: Difference and When to Use Which
Updated 5 November 2026
CAGR measures the yearly growth of one investment made once. XIRR measures the yearly return when you invested several times on different dates, like a SIP. Use CAGR for a lumpsum and XIRR for a SIP or a mixed portfolio.
Why SIPs need XIRR
In a 3-year SIP, your first instalment was invested for 3 years but your last one for only a month. CAGR treats all the money as if it was invested on day one, so it understates SIP returns. XIRR gives each instalment credit for its own time.
Quick guide
| Situation | Use |
|---|---|
| One investment, one exit | CAGR |
| Monthly SIP | XIRR |
| Several top-ups and withdrawals | XIRR |
| Comparing a fund's past performance | CAGR (as shown in factsheets) |
Try it
Open the XIRR calculator and enter your own numbers. Words you don't know are explained in the money glossary.