How to Calculate XIRR: Why CAGR Fails for SIP Returns

Guides · Investing · Updated 2026

If you invest via SIP, your money goes in at different times — every month for years. The total return can't be captured by a simple CAGR (Compound Annual Growth Rate) because CAGR assumes a single lump sum invested at the start. That's where XIRR (Extended Internal Rate of Return) comes in. It accounts for the exact date and amount of each transaction, giving you the true annualised return on your staggered cash flows. This guide demystifies XIRR, explains the formula in plain terms, and shows you a worked example alongside our free calculator.

Why CAGR Misleads for SIPs

CAGR works beautifully for a one‑time investment: ₹1 lakh grows to ₹2 lakh in 5 years → CAGR is about 14.87%. But if you invested ₹10,000 every month for 5 years, that first instalment has been invested for 60 months, while the last instalment for only 1 month. CAGR doesn't know this — it treats everything as if it was deposited on day one. XIRR gives each cash flow a weight based on when it occurred, yielding a much more accurate return figure. It's the standard metric used by mutual fund fact sheets and portfolio trackers.

XIRR is the discount rate that makes the net present value (NPV) of all cash flows zero.
It requires dated cash flows: negative for investments, positive for withdrawals/final value.
Excel/Google Sheets have a built‑in XIRR function; our tool replicates it online.

Step-by-step: Calculate XIRR for Your Investments

Open the XIRR Calculator tool.
Enter each transaction as a row: date and amount (e.g., -₹10,000 for SIP outflows). Add the final portfolio value on the last date as a positive amount.
Add as many rows as needed — the tool handles irregular intervals and lump‑sum additions.
Click calculate. The tool solves for the annualised rate that equates the present value of all your investments to the final value.

💡 Tip: For accurate XIRR, include the exact dates — even a few days' difference can shift the rate slightly. Most portfolio statements provide the transaction history you need.

Worked Example: SIP XIRR Calculation

      Scenario: You invest ₹10,000 on the 1st of every month from Jan 2024 to Dec 2024 (12 installments). Total invested = ₹1,20,000. On 1 Jan 2025, the portfolio value is ₹1,35,000.

      Cash flows:

      01-Jan-2024: -₹10,000

      01-Feb-2024: -₹10,000

      ...

      01-Dec-2024: -₹10,000

      01-Jan-2025: +₹1,35,000

      Result: XIRR ≈ 21.6%. This is the true annualised return, reflecting that early investments had more time to compound.

If you had only one initial lump sum, a simpler CAGR Calculator would suffice. But for SIPs, always use XIRR. The tool also works for redemptions and switch‑outs by entering negative amounts for investments and positive for withdrawals.

Frequently Asked Questions

What's the difference between IRR and XIRR?

IRR assumes periodic, regular intervals. XIRR allows for any dates — essential for real‑world SIPs where dates shift on weekends/holidays.

Can XIRR be negative?

Yes. If your portfolio value is less than the total invested, XIRR becomes negative, indicating a loss on an annualised basis.

How do I interpret a very high XIRR (e.g., 50%)?

A short investment period can inflate XIRR. Annualised returns are most meaningful over 3+ years. Compare with the fund's benchmark over similar durations.

Does XIRR account for dividends?

If dividends are paid out, enter them as positive cash flows on the date received. If reinvested, they're reflected in the final NAV value.

Is it free and private?

Yes — the tool runs entirely in your browser, free, with no sign‑up and nothing uploaded to a server.

Try the XIRR Calculator