Neutral impactEconomy
CAGR Vs XIRR Vs Absolute Return: How To Measure Mutual Fund Returns?
NDTV Profit 3d ago·27 Aug 2026, 3:09 pm
Investors often confuse different ways to calculate mutual fund returns. The absolute return simply shows the percentage change from the initial investment to the current value, ignoring the time period. The Compound Annual Growth Rate (CAGR) assumes a steady growth rate over a specific year, which rarely happens in volatile markets. The XIRR, or Extended Internal Rate of Return, is the most accurate method for SIPs. It accounts for the timing of every transaction, making it the standard for measuring the true performance of investments made at different times.
Understanding these metrics matters because it helps investors compare funds fairly. A fund with a high absolute return might look good, but a lower CAGR or XIRR could indicate inconsistent performance. For regular investors, XIRR is the key metric to track, as it reflects the actual efficiency of their money growing over time. Always compare XIRR values across similar funds to make informed decisions.
Key takeaways
- Category: Economy.
Why it matters
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