Glossary term
XIRR
Annualised return on a series of cash flows happening on irregular dates — the right way to measure SIP returns.
XIRR (Extended Internal Rate of Return) is the annualised return on an investment with multiple cash flows occurring on different dates. It's the only correct way to measure the return on a SIP, because a SIP is a series of monthly buys at different NAVs.
CAGR assumes a single buy and a single sell — XIRR handles the messy reality of monthly contributions, top-ups, partial redemptions, and dividends. If you're comparing the performance of two SIPs, always use XIRR; never absolute return or CAGR.
See also