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Investing

XIRR vs CAGR vs Absolute Return in Mutual Funds

Use absolute return for holdings under a year, CAGR for a single lump sum held longer, and XIRR for SIPs or any series of investments on different dates.

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Written by Aarav Sharma

Published 17 October 2026·6 min read

On this page8 sections
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XIRR is the annual return on a mutual fund investment made in several instalments on different dates, such as a SIP. Use absolute return for a holding of under a year, CAGR for a single lump sum held longer, and XIRR for everything else. A SIP’s value compared with total money invested understates the real return, because the later instalments were invested for only a short time.

Key facts

Measure What it tells you Use it for
Absolute return Total gain as a percentage of the amount invested, ignoring time A holding of one year or less
CAGR Average yearly growth between one start date and one end date A lump sum held for more than a year; fund performance tables
XIRR Annual return that accounts for the date and size of every cash flow SIPs, STPs, SWPs, top-ups and part withdrawals
Fund factsheets Absolute return for periods up to 1 year; CAGR beyond; SIP returns on an XIRR basis Comparing a scheme with its benchmark

Absolute return

Absolute return is the simplest measure:

Absolute return = (current value − amount invested) ÷ amount invested × 100

If you invest ₹50,000 and it is worth ₹54,000, the absolute return is 8%. The figure says nothing about time. An 8% gain in three months and an 8% gain in three years look identical. That is why AMCs such as Mirae Asset show returns for periods of one year and below as absolute figures, and switch to CAGR beyond that.

CAGR and when it applies

Compound annual growth rate (CAGR) converts a gain over several years into a yearly rate:

CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1

Suppose you invest ₹1,00,000 once and it grows to ₹1,61,051 in five years. The absolute return is 61.05%, but the CAGR is 10%. CAGR assumes a single investment at the start and no money added or taken out in between.

Scheme performance tables in fund factsheets use CAGR for 1, 3 and 5 years and since launch. Those figures are point-to-point NAV growth. Your own return will match them only if you invested a lump sum on the first day of the period and did nothing after. Our lumpsum calculator works on the same CAGR logic.

XIRR for SIPs and irregular investments

Extended internal rate of return (XIRR) finds the single annual rate at which all your investments, grown for the exact number of days each was invested, add up to today’s value. It handles any number of cash flows on any dates.

Worked example: a 12-month SIP

You invest ₹10,000 on the 1st of every month from January to December 2025, a total of ₹1,20,000. On 1 January 2026 the holding is worth ₹1,30,000.

  • Absolute return: ₹10,000 gain on ₹1,20,000 invested = 8.33%.
  • XIRR: about 15.7% a year.

The XIRR is higher because only the January instalment was invested for a full year. The December instalment was invested for one month. On average your money was at work for about half a year, so an 8.33% gain works out to roughly double that on an annual basis.

Worked example: two lump sums

You invest ₹50,000 on 1 April 2023 and another ₹50,000 on 1 April 2025. On 1 April 2026 the total is worth ₹1,25,000.

  • Treating ₹1,00,000 as if it were invested for all three years gives a CAGR of about 7.7%.
  • The XIRR, which knows the second ₹50,000 was invested for only one year, is about 11.5%.

How to calculate XIRR in a spreadsheet

  1. In column A, enter each transaction date, using the date format your spreadsheet recognises.
  2. In column B, enter each investment as a negative number (for example, −10000).
  3. Enter any withdrawal or dividend paid out to you as a positive number on its date.
  4. In the last row, enter today’s date and the current value of the holding as a positive number.
  5. Type =XIRR(B2:B14, A2:A14), adjusting the ranges, and format the cell as a percentage.

Excel’s XIRR function needs at least one negative and one positive value and discounts on a 365-day year. Entering dates as plain text can cause errors. Our SIP calculator projects a fixed monthly SIP forward at an assumed rate, which is the same calculation run in reverse.

Reading returns in your CAS

Mutual funds must issue a Consolidated Account Statement (CAS) for each month in which you transact, by the 15th of the following month. A half-yearly CAS for September and March goes to investors with no transactions in that period. SEBI requires the CAS to show the total purchase value or cost of investment in each scheme. The half-yearly CAS also shows the commission paid to your distributor.

To work out your return from a CAS:

  1. Download a detailed CAS from MF Central or the CAMS or KFintech website, choosing the period you need.
  2. List each purchase, SIP instalment, switch and redemption with its date and amount.
  3. Take the current market value of each scheme from the statement.
  4. Run XIRR on those cash flows scheme by scheme, or for the whole portfolio.

Many broker and platform dashboards show an XIRR figure already. Check whether it covers only your current holdings or also includes units you have sold.

Common mistakes when comparing returns

ItemDetails
Comparing your SIP’s absolute return with a fund’s CAGR.The two measure different things. Compare your XIRR with the fund’s SIP return, which factsheets usually calculate on an XIRR basis.
Annualising a short-period return.A 5% gain in two months does not mean 30% a year. XIRR over a few weeks or months can show extreme figures, so treat short-period XIRR with caution.
Leaving out withdrawals and dividends.A payout taken in cash is part of your return. Leave it out and XIRR comes out too low. Our guide to systematic withdrawal plans shows how regular withdrawals affect the value.
Ignoring costs and tax.NAV-based returns are after the fund’s expense ratio but before your capital gains tax. See our page on mutual fund taxation.
Treating trailing returns as a promise.Past CAGR in a fund’s table does not tell you what the fund will return next. If you are comparing schemes, the mutual fund screener lets you line up the same periods side by side.

Frequently asked questions

What is XIRR in a mutual fund?

XIRR is the annualised return on investments made on different dates, such as SIP instalments. It weighs each amount by how long it was invested.

What is the difference between CAGR and XIRR?

CAGR assumes one investment at the start and one value at the end. XIRR handles many investments and withdrawals on any dates. For a single lump sum with no other cash flows, the two give the same answer.

Why is my SIP XIRR higher than my absolute return?

Absolute return ignores time. Later SIP instalments have been invested for only a few months, so the same gain is a higher rate per year.

Is XIRR the same as the fund’s return?

No. A factsheet shows the scheme’s NAV growth over fixed periods. Your XIRR depends on when you invested and how much, so two investors in the same fund can have different XIRRs.

When should I use absolute return?

For a holding of one year or less. Annualising a short-period gain can overstate the return.

Can XIRR be negative?

Yes. If the current value is less than the total you invested, XIRR is negative.

Sources

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