XIRR vs CAGR: Which Shows Your Real Stock Returns?
Both measure returns, but one lies to you. Here's the truth every Indian investor needs to know.
The Simple Difference
📊 CAGR
Compound Annual Growth Rate
Assumes you invested a lump sum at the start and held until the end. Ignores all cash flows in between.
📈 XIRR
Extended Internal Rate of Return
Accounts for every buy and sell with exact dates. Shows true annualized return on your actual cash flows.
A Real Example
Let's say you invested in stocks like this:
| Date | Action | Amount |
|---|---|---|
| Jan 2022 | Invested | -₹50,000 |
| Jun 2022 | Invested | -₹30,000 |
| Dec 2023 | Sold All | +₹1,00,000 |
Your total profit is ₹20,000 on ₹80,000 invested = 25% return. But wait...
CAGR Calculation
~11.8%
Assumes ₹80k invested at start
XIRR Calculation
~15.2%
Accounts for ₹30k added later
XIRR is higher because ₹30,000 was invested 6 months later—it had less time to grow, so the same profit means a higher annualized return!
When Does This Matter?
- SIP investors — You add money monthly, CAGR is wrong
- Active traders — Multiple buys and sells, CAGR is useless
- Partial exits — Sold some holdings? CAGR can't handle it
🎯 Bottom Line
CAGR is for lump-sum investors. XIRR is for everyone else. If you've ever added money to your portfolio or sold partially, you need XIRR to know your real returns.
Why Your Broker Shows CAGR
Brokers often show CAGR because it's simpler to calculate. But for retail investors who invest over time, it's almost never accurate.
That's why we built TrueXIRR—to give you the real picture of your returns.
Calculate Your True XIRR
Upload your tradebook and know your real annualized returns. Free & private.
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