XIRR Explained: How to Measure Your Real SIP Returns in India
Open your mutual fund app and you will see a return number. But is it the right number? If you invest through SIPs — money going in every month, maybe a withdrawal here and there — the return figure you see is often misleading. The one number that tells the truth about your actual, personal return is XIRR.
This guide explains what XIRR is, why it beats every other return measure for SIP investors, and how to calculate it yourself in under two minutes.
Why "absolute return" misleads SIP investors
Say you invested ₹1,20,000 through a 12-month SIP and your investment is now worth ₹1,35,000. Your gain is ₹15,000, so your absolute return is 12.5%.
Sounds fine — but it is wrong as an annual rate. You did not invest ₹1,20,000 on day one. You invested ₹10,000 each month. The first instalment worked for 12 months; the last one worked for barely one month. Absolute return treats all the money as if it was invested for the full period, which understates how hard your money actually worked.
Why CAGR does not work either
CAGR (Compound Annual Growth Rate) answers a different question: "If I invested one lump sum once and it grew to today's value, what steady annual rate does that imply?" It assumes exactly two cash flows — one in, one out.
A SIP has 12, 60 or 240 cash flows in, plus possibly withdrawals. CAGR simply cannot handle that. Use CAGR for a one-time investment; never for a SIP.
What XIRR actually is
XIRR (Extended Internal Rate of Return) is the single annual rate that makes the present value of every one of your cash flows — each instalment on its actual date, each withdrawal on its actual date, and today's value — add up to zero.
In plain words: it is the yearly return your actual money, invested on actual dates, truly earned. Two investors in the same fund can have completely different XIRRs because they invested on different dates and amounts. XIRR is personal; the fund's published returns are not.
A verified worked example
Take the SIP above: ₹10,000 on the 1st of every month for 12 months (January 2025 to December 2025), and the investment is worth ₹1,35,000 on 1 February 2026.
- Total invested: ₹1,20,000
- Final value: ₹1,35,000
- Absolute return: 12.5%
- XIRR: 20.33% per year
We verified this by solving for the rate that makes all 13 dated cash flows net to zero. The XIRR is much higher than the absolute return because most of your money was not invested for the full period — and XIRR correctly credits each rupee only for the time it was actually invested.
This is the key insight: for a rising investment, XIRR will usually be higher than absolute return; for a falling one, lower. Neither is "wrong" — they answer different questions — but only XIRR is comparable to other annual rates like FD interest or a fund's 1-year return.
How to calculate XIRR yourself (2 minutes)
In Excel or Google Sheets
=XIRR(B1:B14, A1:A14) — the result is your annualised return.Without a spreadsheet
Your fund house statement and most investment apps show XIRR directly on your portfolio. CAMS and KFintech consolidated statements also show scheme-level XIRR. Just make sure you are looking at "XIRR" or "annualised return", not absolute return.
Common mistakes when reading XIRR
- Short periods exaggerate it. A 3-month SIP can show a 60% XIRR from one good quarter. XIRR annualises whatever happened, so it is only meaningful over at least a year — ideally three or more.
- Comparing XIRR to a fund's point-to-point return. The fund's 5-year return assumes a lump sum on day one. Your SIP XIRR will differ, and that is normal.
- Ignoring withdrawals and switches. Every money movement must be in the cash-flow list, or the number is garbage. Dividends (IDCW payouts) count as positive cash flows too.
- Forgetting taxes and costs. XIRR from your statement is pre-tax. Equity gains above ₹1.25 lakh in a financial year are taxed at 12.5% (held over 12 months); see our mutual fund taxation guide for the full FY 2025-26 rules.
XIRR vs CAGR vs absolute return: quick reference
| Measure | Best for | Handles multiple dates? | Annualised? |
|---|---|---|---|
| Absolute return | Quick gain check | No | No |
| CAGR | One-time lump sum | No (2 cash flows only) | Yes |
| XIRR | SIPs, withdrawals, real portfolios | Yes | Yes |
Your action plan
FAQs
What is a good XIRR for a SIP?
There is no fixed "good" number — it depends on the period and the fund category. Over long periods, equity funds have historically delivered low-to-mid teens annualised, but past performance does not guarantee future returns. Judge your XIRR against the fund's benchmark over the same dates, not against an absolute target.
Is XIRR the same as CAGR?
No. CAGR works only for a single investment and a single redemption. XIRR handles any number of dated cash flows, which is why it is the correct measure for SIPs. For a one-time lump sum with no other transactions, XIRR and CAGR give the same answer.
Why is my XIRR negative even though the fund is up?
Because XIRR depends on your dates. If you invested large amounts just before a fall, your personal return can be negative even while the fund's long-term chart rises. This is exactly why XIRR is more honest than fund-reported returns.
Does XIRR include expense ratio and taxes?
The XIRR computed from your actual investment value already reflects the fund's expense ratio (it is deducted from the NAV daily). It does not reflect taxes you will pay on redemption — those come out of your pocket separately.
Can I calculate XIRR for multiple funds together?
Yes. Put every cash flow across all funds into one dated list and run XIRR on the whole set. That gives you your true portfolio-level annualised return — the single most useful number for tracking progress toward a goal.
Disclaimer: This article is for education only and is not investment advice. Mutual fund investments are subject to market risks. Past performance does not guarantee future returns. Consult a SEBI-registered investment adviser before making investment decisions. Figures verified as of October 2026.
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