What is XIRR? Why your mutual fund app might be showing you the wrong return

You check your mutual fund app. It says the fund has delivered 18% returns. But when you look at what you actually invested vs what your money is worth today — the math doesn't add up. Sound familiar?

The reason is almost always the same: the app is showing you CAGR. And CAGR, for a SIP investor, is the wrong number.

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It assumes you invested all your money on a single day, and held it until today. It's perfect for measuring how a fund performed — but only if you did a one-time lumpsum investment.

If a fund's NAV went from ₹100 to ₹250 in 5 years, its CAGR is about 20%. Clean and simple.

Why CAGR is wrong for SIP investors

But you didn't invest all your money on day one. You invested ₹5,000 in month 1, then another ₹5,000 in month 2, and again in month 3... Each instalment was invested at a different time, at a different NAV, and has been growing for a different number of years.

Your first instalment has been invested for the full 5 years. Your last one — maybe just 1 month. CAGR ignores all of this. It treats your money as if it all went in on day one.

What is XIRR?

XIRR stands for Extended Internal Rate of Return. It's a formula that accounts for the exact timing of every single instalment you made.

It asks: "Given all the amounts you invested and when you invested them — what annual return rate would produce the final value you have today?" That's your actual return.

XIRR is more complex to calculate (it requires iterative math), but it's the only honest answer for anyone doing a SIP.

How big is the difference?

A 4% gap doesn't sound alarming. But mentally, an investor who thought they were earning 18% when they were actually earning 14% will make very different decisions about how much to invest, whether to continue, and whether to switch funds.

What's a "good" XIRR?

For a diversified equity fund SIP held for 5+ years:

• Above 12%Solid performance — beating inflation comfortably
• 10–12%Decent — reasonable for most large-cap equity
• 8–10%Okay — roughly in line with index funds
• Below 8%Review the fund — might not be worth the equity risk

These are rough guides. The right benchmark depends on the fund category, the time period, and what the relevant index (Nifty 50, Nifty Midcap 150, etc.) delivered in the same period.

Where to see your actual XIRR

Your CAMS or KFintech statement can show this if you download and calculate it manually in Excel using the =XIRR()function. Most apps don't show it prominently.

Our fund recommendations page shows live XIRR (3-year and 5-year) for every matched fund — so you can compare funds on a true like-for-like basis, not just the headline CAGR.