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CAGR vs IRR in mutual funds | IRR vs XIRR in Mutual funds

  • CAGR → Compounded Annualised Growth Rate
  • IRR → Internal Rate of Return
  • XIRR→ A powerful function in Excel software to calculate IRR

CAGR is applicable for single lump sum investment.
IRR is applicable for SIP investments made on same dates (regular intervals) in a month.
XIRR is used to calculate the returns on the SIP or lump sum Investments that made on irregular intervals (Any dates).This formula can be used only in excel sheet to calculate complicated calculations (multiple investments and multiple withdrawals over a long period).

CAGR is highlighted in many mutual fund websites and rating sites. Hence, CAGR is the better tool to judge the performance of the fund. If you want to know the SIP past performance of a particular fund, some mutual fund sites highlight the return on the SIP over the last few years. They use IRR/XIRR to calculate the returns.