The FD interest rate equivalent
Think of XIRR as: "If I put all my SIP money into a single FD that compounds annually, what interest rate would give me the same final amount?" It's your personal, real return rate.
XIRR for SIP Investors
Why CAGR Fails for SIPs
CAGR assumes one investment at the start and one value at the end. But with SIP, you invest every month — each installment has a different holding period:
- January SIP has been invested for 12 months
- June SIP has been invested for 7 months
- December SIP has been invested for 1 month
What is XIRR?
XIRR (Extended Internal Rate of Return) calculates the annualized return considering multiple cash flows at different dates. It's the rate that makes the present value of all your investments and the final value equal to zero.
XIRR Example
You invest ₹10,000/month via SIP from Jan to Dec 2024. Total invested: ₹1,20,000. Current value on 31 Dec: ₹1,35,000. XIRR = 18.5% — this is your actual personal return rate, accounting for the fact that earlier SIPs compounded longer.
CAGR vs XIRR
CAGR
- + One cash flow in, one out
- + Use for lumpsum only
- + Simple formula
- + Not your personal SIP return
XIRR
- - Multiple cash flows in/out
- - Use for SIP, SWP, irregular
- - Iterative calculation (Newton-Raphson)
- - Your real personal return rate
Key Takeaway
Your SIP XIRR can differ significantly from the fund's 1Y CAGR because market timing of your SIPs matters, recent SIPs haven't had time to compound, and early SIPs have compounded longer. Always check XIRR for your personal SIP performance.
Your Next Step
Use our SIP Calculator to see XIRR-based projections with real numbers.