What is XIRR?
Extended Internal Rate of Return
XIRR is the annualised return of an investment where money goes in and out at irregular dates and amounts — like a SIP. Unlike CAGR, it correctly accounts for the exact date and size of every cash flow.
A regular SIP involves a series of separate investments made on different dates, each growing for a different length of time. CAGR cannot handle this correctly because it assumes a single lump sum invested once. XIRR solves this by finding the single discount rate that makes the present value of all your cash flows (each dated individually) equal to zero.
Fund houses and platforms like Zerodha, Groww, and Kuvera report XIRR — not CAGR — for SIP portfolios, because it is the mathematically correct measure of return when contributions are staggered.
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