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CAGR vs IRR vs XIRR: which return to use

By the CAGR Calculator team · Published

Quick answer

Use CAGR when there is one investment at the start and one value at the end. Use IRR when money goes in or out at regular intervals, and XIRR when the dates are irregular — such as SIPs, top-ups or partial withdrawals. For a single lump sum, all three give the same answer.

CAGR
One start value, one end value
IRR
Several cash flows at equal intervals
XIRR
Several cash flows on any dates
Excel
=RRI() · =IRR() · =XIRR()
Example SIP
Naive CAGR 6.92% · true XIRR 13.42%

The one-line difference

CAGR only knows two numbers: where you started and where you ended. IRR and XIRR know every cash flow and when it happened. They find the single annual rate at which the present value of all money in equals the present value of all money out. With one deposit and one final value, that rate is exactly the CAGR — so CAGR is really a special case of IRR.

Comparison table

CAGRIRRXIRR
Cash flowsOne in, one outMany, evenly spacedMany, any dates
Accounts for timingStart and end onlyBy period numberBy exact date
Typical useLump sum, revenue, index growthProject appraisal, annual depositsSIPs, brokerage accounts, private equity
ExcelRRIIRRXIRR

Example 1: two deposits

You invest $10,000 on 3 January 2022, another $10,000 on 3 January 2023, and the account is worth $24,000 on 3 January 2025.

  • Naive CAGR on the total — $20,000 → $24,000 over 3 years: 6.27%. Wrong: the second $10,000 was only invested for two years.
  • XIRR — weighting each deposit by its actual time invested: 7.53%.

Example 2: a monthly SIP

₹5,000 is invested on the 5th of every month for 36 months (₹1,80,000 in total), and the portfolio is worth ₹2,20,000 on 5 January 2025.

MeasureResult
Absolute return22.22%
Naive CAGR (as if ₹1,80,000 was invested on day one)6.92%
XIRR (true annual return)13.42%

The naive CAGR halves the real return because the average rupee was invested for only about 18 months, not 36. This is why mutual fund platforms report SIP performance as XIRR.

How to calculate XIRR in Excel

  1. List each cash flow in column A — investments as negative numbers, withdrawals and the final value as positive numbers.
  2. List the matching dates in column B.
  3. Enter =XIRR(A1:A37, B1:B37) and format as a percentage.

For a single lump sum, =RRI(years, start, end) gives the same result — see the CAGR in Excel guide.

When CAGR is still the right tool

  • A lump-sum investment held without additions or withdrawals.
  • Growth of a metric rather than money you invested: revenue, users, market size, an index level or a share price.
  • Comparing how fast two assets grew over the same dates, independent of when you bought.

For these, use the CAGR calculator. If you want to know whether the result was good, compare it with the benchmarks in what is a good CAGR.

Sources and further reading

Educational information only — not investment advice. Past performance does not guarantee future results.

Related questions

Is XIRR the same as CAGR?

Only for a single investment with no deposits or withdrawals in between. In that case XIRR and CAGR give the same answer. With several cash flows, XIRR is the correct annual return and CAGR is not defined.

Why is my SIP return shown as XIRR and not CAGR?

Each SIP instalment is invested on a different date, so each has a different holding period. XIRR weights every instalment by how long it was invested. Applying CAGR to the total invested pretends all the money went in on day one, which badly understates the return.

What is the difference between IRR and XIRR?

IRR assumes cash flows arrive at equal intervals (every year, or every month). XIRR uses the actual date of each cash flow, so it handles irregular investments. In Excel: =IRR(values) versus =XIRR(values, dates).

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