CAGR and XIRR are cousins. Both are annualised rates. They answer different cash-flow shapes. Use CAGR when money went in once and you are reading the value of that same pile later. Use XIRR when money went in or out on more than one date — which is how most Indian SIP folios actually live.
What CAGR assumes
One outflow (you invest) at the start, one inflow (you redeem, or you mark a current value) at the end. Nothing in between. That matches a lumpsum purchase of a mutual-fund growth option, a single stock lot, or a sovereign gold bond held without further buys.
What XIRR assumes
A list of dated cash flows. Sign convention is usually: investments negative, redemptions and the present value positive. XIRR is the rate r that makes the discounted value of every flow sum to zero. Spreadsheet functions (XIRR in Excel, Google Sheets, and most Indian broker consoles) solve that equation numerically. You do not need to solve it by hand.
A SIP is not a CAGR
You start a ₹10,000 monthly SIP in an index fund. Three years later the folio shows ₹4.2 lakh on ₹3.6 lakh invested. Absolute gain is ₹60,000, about 16.7% on the rupees you put in. That is not a 16.7% CAGR. Early instalments sat in the market for almost three years; last month’s instalment sat for three weeks. XIRR weights them by time. CAGR on “total invested vs current value” pretends the whole ₹3.6 lakh was invested on day one, which understates the rate if markets rose (you would be claiming a poor rate on money that was not actually at risk the whole time).
The opposite error is taking the fund’s 3-year factsheet CAGR and assuming your SIP earned it. The factsheet CAGR is a lumpsum invested on day one of that window. Your SIP’s XIRR will differ — sometimes by a lot — because your average cost is a path, not a point.
STP, SWP, and top-ups
- A systematic transfer plan is two series of flows (out of debt, into equity). Each folio has its own XIRR.
- A systematic withdrawal plan adds positive flows after the accumulation years. CAGR on “what I first put in vs what’s left” throws away the rupees you already took out.
- A one-time top-up in year two is enough to break a clean CAGR. Either split the lots or switch to XIRR.
When CagrRupee is enough
You know the buy amount, the current (or sell) amount, and the dates are one stretch with no other lots. That is the job thisCAGR calculator is built for. It will also run on months if you held for 14 or 20 months instead of a round number of years.
A compact comparison
| CAGR | XIRR | |
|---|---|---|
| Cash flows | Two | Many, dated |
| Typical use | Lumpsum, point-to-point NAV | SIP, SWP, mixed lots |
| On a factsheet | Trailing 3Y / 5Y / 10Y | Usually absent |
| In CagrRupee | Yes | No — by design |
If you want the lumpsum arithmetic in slow motion, continue to theworked mutual-fund example.
Run the same numbers in the CAGR calculator, or read thedisclaimer before you treat a rate as a decision.