Archive · 14 Aug 2025
Understanding XIRR: A Guide to Evaluating SIP Returns
When you invest in mutual funds using a Systematic Investment Plan (SIP), you put money in regularly.
To see how well your investments are doing, you should use XIRR, which is like a special calculator for returns.
Unlike a simple calculator (CAGR) that only looks at the start and end values, XIRR considers all the times you put money in and took money out.
It figures out the real return by considering when you made each investment or withdrawal.
Most online platforms and statements show XIRR, so you can easily see how your SIPs are performing.
XIRR is used to evaluate returns on mutual fund SIPs.
XIRR accounts for multiple investments and redemptions during the SIP tenure.
CAGR only considers the initial and end value of investment.
XIRR discounts cash flows based on their timing to arrive at present value.
XIRR returns are often displayed by default in online mutual fund platforms.
- Who
- Investors using SIPs to invest in mutual funds.
- What
- XIRR is used to evaluate returns in mutual fund SIPs.
- When
- XIRR is used when assessing the returns on investments with multiple inflows and outflows.
- Where
- XIRR is available on online platforms and account statements.
- Why
- To accurately calculate the real-world investment returns, considering all cash inflows and outflows.
CAGR
XIRR
Complexity
CAGR
CAGR provides a basic understanding of investment returns.
XIRR
XIRR is better for SIPs due to regular investments.
- XIRR stands for
- External Internal Rate of Returns
- CAGR Limitation
- Considers only start and end values
- XIRR accounts for
- Multiple cash inflows and outflows
- XIRR Calculation
- Discounts cash flows based on timing
- XIRR formula in Excel
- =XIRR(values, dates,[guess])