What is XIRR and How to Calculate SIP Returns
Learn what XIRR means, how it differs from CAGR, and why XIRR is the most accurate way to measure SIP returns.
IPOFins Team
Finance Research & Data • June 2026
What is XIRR?
XIRR stands for Extended Internal Rate of Return. It calculates the annualized return on investments when money goes in (or comes out) on different dates — making it the most accurate measure for SIP returns.
Why CAGR Fails for SIPs
CAGR assumes a single lump-sum investment on one date. But with SIP, you invest ₹5,000 in January, another ₹5,000 in February, and so on. Each installment has a different holding period. CAGR cannot account for this — XIRR can.
XIRR vs CAGR
| Feature | XIRR | CAGR |
|---|---|---|
| Best for | SIPs, multiple cash flows | Lumpsum, single investment |
| Considers timing | Yes (exact dates) | No (start & end only) |
| Accuracy for SIP | High | Misleading |
Example
You invest ₹5,000 every month for 5 years. Current portfolio value: ₹4,50,000. Total invested: ₹3,00,000.
XIRR calculation considers each ₹5,000 investment date separately and determines that your annualized return is approximately 14.2%.
How to Calculate XIRR in Excel
Use the formula: =XIRR(values, dates)
Where:
- values = column of cash flows (negative for investments, positive for current value)
- dates = corresponding dates for each cash flow
Example Setup
| Date | Amount |
|---|---|
| 01-Jan-2021 | -5000 |
| 01-Feb-2021 | -5000 |
| 01-Mar-2021 | -5000 |
| ... | ... |
| Today | +4,50,000 (current value) |
What is a Good XIRR?
- Equity mutual funds: 12-15% over 7+ years is excellent
- Debt funds: 7-9% is reasonable
- Index funds: 11-14% matches market returns
FAQs
Should SIP investors track XIRR?
Absolutely. It is the only accurate way to know your true annualized returns from SIP investments.
Can XIRR be negative?
Yes. If your portfolio value is less than what you invested, XIRR will be negative.