What is XIRR? How SIP returns are really measured

XIRR (Extended Internal Rate of Return) is the single annualised return percentage for a series of investments and withdrawals made on different dates. For a SIP — where you invest a bit every month — it's the only fair way to express "what return did I actually earn?"

Why not just use absolute return?

If you SIP ₹5,000/month for 5 years (₹3,00,000 invested) and it grows to ₹4,20,000, the absolute return is 40%. But that 40% is misleading — your first instalment was invested for 5 full years, while your last one was invested for just a month. XIRR accounts for exactly how long each rupee was invested, giving a true annual rate (here, roughly 12% p.a.).

How it's calculated

XIRR finds the single annual rate that makes the present value of all your cash flows equal to zero. Each instalment is a dated cash outflow; the final value is a dated inflow. It's the same logic Excel's XIRR() uses.

Rules of thumb

• Use XIRR for SIPs, STPs, or any irregular investing.
• Use CAGR for a single lumpsum held over a period.
• A higher XIRR isn't always "better" — check the risk and consistency too.

→ See your numbers with the SIP & XIRR calculator, or backtest a real fund's SIP XIRR in the Backtest tab.