Mutual Fund Returns Calculator: CAGR vs XIRR vs Absolute Returns
Same Fund, Three Different Return Numbers — Which Is Right?
A mutual fund factsheet shows 25% absolute return, 15% CAGR, and 12.5% XIRR. All three are "correct" but measure different things. Using the wrong metric leads to wrong expectations and poor decisions.
When to Use Each Metric
| Metric | Best For | Limitation |
|---|---|---|
| Absolute Return | Investments held < 1 year | Doesn’t account for time; meaningless for multi-year holdings |
| CAGR | Lumpsum investments over 1+ years | Assumes single investment; doesn’t handle SIP correctly |
| XIRR | SIP and irregular investments | Requires exact dates of each cash flow |
Example: Why CAGR Overstates SIP Returns
You invest ₹10,000/month via SIP for 3 years (₹3.6L total). Corpus grows to ₹4.5L. CAGR of the corpus (from first SIP to today) might show 18% — but this ignores that most of your money was invested for far less than 3 years. The XIRR (which accounts for each SIP’s investment date) might show only 12%. That’s the true return.
Use the CAGR calculator for lumpsum, or the XIRR calculator for SIP returns.