Annualised Return — Mutual Fund Term Explained

Returns expressed as a yearly rate, making different investment periods comparable. For lump sum: CAGR. For SIP: XIRR.

Annualised return converts total return over any period into a 'per year' equivalent. For a lump sum investment, CAGR is the annualised return. For irregular cash flows (SIPs), XIRR gives the annualised return.

Related terms

• CAGR — Compound Annual Growth Rate. Measures how much a lump sum investment grew per year on average. Not ideal for SIP returns — use XIRR instead.
• XIRR — Extended Internal Rate of Return. The most accurate way to calculate SIP returns — accounts for the exact timing and amount of each cash flow.
• Absolute Return — Total profit or loss as a simple percentage, without annualising. Misleading for comparing across different timeframes.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.