Understand why your SIP returns (XIRR) don't match the mutual fund's reported CAGR. Learn to calculate both correctly and evaluate your real investment performance.
Your mutual fund shows 15% CAGR. Your SIP statement shows 11% XIRR. Both are correct—but they measure different things. Here's why they differ and which one matters for you.
Why the Numbers Don't Match
The Core Difference
| Metric |
What It Measures |
Best For |
| CAGR |
Fund's growth rate over a period |
Evaluating fund performance |
| XIRR |
Your personal return considering cash flows |
Evaluating your investment |
Calculate your returns: Use our MF Returns Calculator.
A Simple Example
| Month |
Action |
Amount |
| Jan 2020 |
NAV = ₹100 |
— |
| Jan 2020 |
SIP Investment |
₹10,000 (100 units) |
| Jan 2021 |
NAV = ₹120 |
— |
| Jan 2021 |
SIP Investment |
₹10,000 (83.3 units) |
| Jan 2022 |
NAV = ₹140 |
— |
| Jan 2022 |
Value |
₹25,666 |
Fund CAGR: (140/100)^(1/2) - 1 = 18.3%
Your SIP XIRR: Based on your cash flows = ~14.7%
Why the gap? Your second installment only grew for 1 year, not 2.
Understanding CAGR
What CAGR Shows
CAGR = (Ending Value / Beginning Value)^(1/n) - 1
| Example |
Beginning |
Ending |
Years |
CAGR |
| Fund A |
₹100 NAV |
₹200 NAV |
5 |
14.9% |
| Fund B |
₹50 NAV |
₹85 NAV |
5 |
11.2% |
CAGR Limitations
| Limitation |
Impact |
| Ignores timing of your investments |
Doesn't reflect SIP experience |
| Assumes single lumpsum at start |
Unrealistic for most investors |
| Smooths out volatility |
Hides interim drawdowns |
When to Use CAGR
| Use CAGR To |
Don't Use CAGR To |
| Compare fund vs benchmark |
Measure your SIP returns |
| Evaluate fund manager |
Calculate your wealth growth |
| Historical fund analysis |
Plan future SIP amounts |
Understanding XIRR
What XIRR Shows
XIRR (Extended Internal Rate of Return) considers:
- Amount of each investment
- Date of each investment
- Final redemption value and date
XIRR Calculation Logic
| Date |
Cash Flow |
Explanation |
| 01 Jan 2020 |
-₹10,000 |
First SIP (negative = outflow) |
| 01 Feb 2020 |
-₹10,000 |
Second SIP |
| ... |
... |
... |
| 01 Dec 2024 |
-₹10,000 |
Last SIP |
| 31 Dec 2024 |
+₹9,50,000 |
Final value (positive = inflow) |
Excel/Google Sheets: =XIRR(cash_flows, dates)
When to Use XIRR
| Use XIRR To |
Don't Use XIRR To |
| Measure your actual returns |
Compare two different funds |
| Evaluate SIP performance |
Analyze fund manager skill |
| Track wealth creation |
One-time lumpsum investments |
Why Your XIRR Can Be Higher Than Fund CAGR
Scenario: Market Dip During SIP
| Period |
Market |
Your SIP Advantage |
| Year 1 |
Up 15% |
Bought at low NAV |
| Year 2 |
Down 20% |
Bought MORE at lower NAV |
| Year 3 |
Up 35% |
Massive gains on Year 2 units |
Result: Your XIRR can exceed fund CAGR when you buy more units during dips.
Example
| Month |
NAV |
SIP ₹10,000 |
Units |
| Jan |
₹100 |
₹10,000 |
100 |
| Jul |
₹80 (dip) |
₹10,000 |
125 |
| Dec |
₹110 |
— |
— |
- Total units: 225
- Final value: 225 × ₹110 = ₹24,750
- Invested: ₹20,000
- Your XIRR: ~34%
- Fund CAGR (100 to 110): 10%
You beat the fund's CAGR because you bought more during the dip!
Why Your XIRR Can Be Lower Than Fund CAGR
Scenario: Market Rally During SIP
| Period |
Market |
Your SIP Disadvantage |
| Year 1 |
Up 30% |
Bought less units |
| Year 2 |
Up 25% |
Bought even fewer units |
| Year 3 |
Flat |
Not much averaging benefit |
Example
| Month |
NAV |
SIP ₹10,000 |
Units |
| Jan |
₹100 |
₹10,000 |
100 |
| Jul |
₹130 (rally) |
₹10,000 |
77 |
| Dec |
₹150 |
— |
— |
- Total units: 177
- Final value: 177 × ₹150 = ₹26,550
- Invested: ₹20,000
- Your XIRR: ~57% (looks high but...)
- Lumpsum would have given: 50% (₹100 to ₹150)
If you'd invested ₹20,000 lumpsum in January, you'd have ₹30,000—more than SIP's ₹26,550.
Real-World Comparison
5-Year SIP in Nifty 50 Index Fund
| Metric |
Value |
| Fund 5-year CAGR |
12.5% |
| Your SIP XIRR |
10.8% |
| Why lower? |
Most money invested in last 2-3 years |
The Weighted Average Effect
| Year |
Amount Invested |
Compounding Years |
| Year 1 |
₹1.2 lakh |
5 years |
| Year 2 |
₹1.2 lakh |
4 years |
| Year 3 |
₹1.2 lakh |
3 years |
| Year 4 |
₹1.2 lakh |
2 years |
| Year 5 |
₹1.2 lakh |
1 year |
Average compounding time: ~3 years, not 5 years.
How to Calculate Your Returns
Method 1: Excel/Google Sheets XIRR
| Step |
Action |
| 1 |
List all SIP dates in Column A |
| 2 |
List SIP amounts as negatives in Column B |
| 3 |
Add final date and positive value at end |
| 4 |
Use =XIRR(B:B, A:A) |
Method 2: Use Our Calculator
| Input |
What to Enter |
| Initial investment |
Your first SIP or lumpsum |
| Monthly SIP |
Regular investment amount |
| Period |
Investment duration |
| Current value |
Today's portfolio value |
Use our MF Returns Calculator for instant results.
Method 3: App/Platform Reports
| Platform |
Where to Find |
| Zerodha Coin |
Portfolio → XIRR column |
| Groww |
Portfolio → Returns tab |
| Kuvera |
Holdings → Performance |
| AMC Website |
Statement → Returns |
Which Metric Should You Track?
Track XIRR For
| Purpose |
Why XIRR |
| Personal financial planning |
Shows your actual wealth growth |
| Goal progress |
Tells if you're on track |
| Comparing your investments |
Fair comparison of different SIPs |
Track Fund CAGR For
| Purpose |
Why CAGR |
| Choosing funds |
Compare fund performance fairly |
| Benchmark comparison |
Fund vs index |
| Manager evaluation |
Did they beat the market? |
Common Misconceptions
Misconception 1: "My SIP is underperforming"
| Reality |
Your XIRR is lower because recent money had less time to grow |
| Not a problem |
This is normal for any SIP |
| Over time |
XIRR approaches fund CAGR as early investments dominate |
Misconception 2: "Fund shows 18% but I got only 12%"
| Reason |
Explanation |
| Different periods |
Fund CAGR is often trailing (last 3/5 years) |
| Your start date |
You may have started at different point |
| SIP vs Lumpsum |
Fund CAGR assumes lumpsum |
Misconception 3: "XIRR is wrong"
| Fact |
XIRR is the only correct measure for SIP investments |
| Why |
It accounts for when each rupee was invested |
| Trust it |
Even if it seems counterintuitive |
Improving Your SIP Returns
Strategy 1: Start Early
| Starting |
Impact on XIRR |
| Early start |
More time for compounding, XIRR approaches CAGR |
| Late start |
Recent investments dominate, lower XIRR |
Strategy 2: Invest More During Dips
| Action |
Effect |
| Extra SIP during 10%+ correction |
Buy more units at lower price |
| Increases average units |
Boosts XIRR when market recovers |
Strategy 3: Lumpsum + SIP Hybrid
| Approach |
Benefit |
| Start with lumpsum |
Gets full compounding benefit |
| Continue SIP |
Adds averaging benefit |
| Result |
Often higher XIRR than pure SIP |
Key Takeaways
| Point |
Summary |
| CAGR |
Fund's return assuming lumpsum investment |
| XIRR |
Your actual return considering all SIPs |
| Difference is normal |
SIP XIRR ≠ Fund CAGR is expected |
| For comparison |
Use CAGR to compare funds |
| For your returns |
Use XIRR to track personal performance |
| Market timing |
SIP buys more in dips, less in rallies |
Calculate your actual returns: Use our MF Returns Calculator to see your true XIRR, and CAGR Calculator for fund comparison.
