XIRR vs CAGR: which return belongs to your investment?
CAGR summarises the change from one starting value to one ending value over time. XIRR accounts for multiple dated cash flows. Choosing the method starts with identifying when your own money entered or left the investment.
By INDwise · Published 29 October 2026 · Editorial policy
Illustration: one investment followed by dated receipts
Annualised XIRR: 11.57%
| Cash-flow timing | Dated cash flows — XIRR |
|---|---|
| Dated cash flows in INR | 2021-01-01, -100000 2022-01-01, 20000 2023-01-01, 20000 2024-01-01, 20000 2025-01-01, 80000 |
| Total invested / paid out | ₹1,00,000 |
| Total received | ₹1,40,000 |
| Net cash surplus / deficit | ₹40,000 |
| Cash-flow entries | 5 |
| Period covered | 4 years |
Use CAGR for a clean start and finish
A one-time investment with no interim additions or withdrawals can be described by CAGR. If you use only the opening and ending balances of an account that also received new deposits, the resulting percentage mixes your contributions with investment performance.
Use XIRR when dates and cash flows matter
Enter an investment as a negative flow and a receipt as positive. For an open holding, include its valuation on the measurement date as a positive final flow. This is an accounting input for the return calculation, not a claim that you sold the holding. The tool uses actual elapsed days divided by 365.
Check whether there is a meaningful single answer
Cash-flow patterns that change sign repeatedly can have multiple internal rates of return. INDwise rejects those patterns rather than showing one potentially misleading number. Net-present-value analysis at chosen discount rates may be more useful for such a sequence.
Questions about this example.
Is a platform’s XIRR guaranteed to match this example?
The exact cash-flow amounts, dates, valuation date and included fees must match. Different rounding or incomplete records can also explain a difference.
Does a high XIRR measure risk?
No. It is a cash-flow return calculation, not a measure of volatility, liquidity or the probability of loss.
Assumptions and references
Conventional cash flows with one sign change only. More complex patterns can have multiple IRRs and are rejected rather than returning a misleading single rate. XIRR sorts dates and combines same-date flows for solving. Taxes and fees should be included as cash outflows if relevant. Supported return range: −99.9999% to 1,000,000%.
Examples are computed from the same calculator functions as the interactive tools. Software checks do not constitute a personalised tax or investment review.