XIRR and CAGR: the return measures, side by side

CAGR is the steady yearly growth rate between one starting value and one ending value; XIRR is the yearly rate that fits a series of dated cash flows, such as SIP instalments and withdrawals. The calculators, modules and app tutorials below show when each one applies and why the two can differ for the same portfolio.

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2Learn modules

Free lessons with a quiz and a certificate.

2Calculators

Put your own numbers on the idea.

2Terminal tutorials

Where the figure sits in the app, in a short video.

3Glossary terms

The words, in plain language.

CAGR: Compound Annual Growth Rate. The yearly rate at which an investment would have grown if it compounded at a constant rate.
Time weighted return: A return that strips out the effect of money added or taken out, so it measures how the holdings themselves did.
Money weighted return per year: The yearly return that takes account of when each rupee went in or came out.

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Questions about XIRR vs CAGR

When is CAGR the right measure?

When there is one sum at the start and one value at the end, with no money added or taken out in between. It answers how fast that sum grew each year on average.

When is XIRR the right measure?

When money goes in or out on different dates, as with a SIP, top ups or withdrawals. XIRR weights each flow by its own date.

What is time weighted return?

A return that removes the effect of when money was added, so it measures the strategy rather than the timing of deposits. The app shows it next to XIRR.

Why do the figures in the app differ?

Each answers a different question. The terminal tutorial on returns three ways shows where each figure sits and how it is computed.

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