CAGR & XIRR Calculator
Calculate Compound Annual Growth Rate (CAGR) and Internal Rate of Return (XIRR) to analyze your investment performance and make informed financial decisions.
CAGR Calculator
Default Example: âš1,00,000 invested for 5 years, growing to âš1,50,000 (50% total return, ~8.45% CAGR)
What is CAGR?
Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
What is CAGR (Compound Annual Growth Rate)?
Compound Annual Growth Rate (CAGR) is a financial metric that represents the mean annual growth rate of an investment over a specified period of time longer than one year. It's one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
CAGR Formula
CAGR = (Final Value / Initial Value)^(1/Time) - 1
When to Use CAGR
- Analyzing single lump sum investments over time
- Comparing investment performance across different time periods
- Evaluating long-term investment strategies
- Understanding compound growth patterns
- Planning retirement or long-term financial goals
CAGR Example
If you invested âš100,000 in a mutual fund and after 5 years it grew to âš150,000, the CAGR would be:
CAGR = (150,000 / 100,000)^(1/5) - 1 = 1.5^(0.2) - 1 = 8.45%
This means your investment grew at an average annual rate of 8.45% over the 5-year period.
What is XIRR (Extended Internal Rate of Return)?
Extended Internal Rate of Return (XIRR) is a financial metric used to calculate the annualized rate of return for investments with irregular cash flows. Unlike CAGR, XIRR considers the timing of each cash flow, making it more accurate for complex investment scenarios.
When to Use XIRR
- Systematic Investment Plans (SIP) with regular monthly investments
- Mutual fund investments with multiple entry and exit points
- Real estate investments with irregular cash flows
- Business investments with varying capital requirements
- Any investment with multiple cash inflows and outflows
XIRR Calculation Method
XIRR uses an iterative approach (Newton-Raphson method) to find the discount rate that makes the Net Present Value (NPV) of all cash flows equal to zero.
XIRR Example
Consider a SIP investment where you invest âš10,000 monthly for 12 months and then withdraw âš150,000:
Monthly investments: âš10,000 Ã 12 = âš120,000 (negative cash flows)
Final withdrawal: âš150,000 (positive cash flow)
XIRR would calculate the annualized return considering the timing of each investment
CAGR vs XIRR: Key Differences
| Aspect | CAGR | XIRR |
|---|---|---|
| Cash Flows | Single initial and final value | Multiple irregular cash flows |
| Time Consideration | Simple time period | Exact dates for each flow |
| Complexity | Simple calculation | Complex iterative method |
| Use Case | Lump sum investments | SIP, mutual funds |
| Accuracy | Good for simple scenarios | More accurate for complex flows |
Investment Analysis Tips
Using CAGR Effectively
- Compare investments over the same time period
- Use for long-term investment planning
- Consider inflation-adjusted returns
- Evaluate risk-adjusted performance
- Set realistic return expectations
Using XIRR Effectively
- Include all cash flows with exact dates
- Use negative values for investments
- Use positive values for returns
- Consider transaction costs and fees
- Compare with benchmark returns
Pro Tip:
Always consider both CAGR and XIRR when analyzing your investment portfolio. CAGR gives you a simple growth perspective, while XIRR provides a more accurate picture of your actual returns considering all cash flows and their timing.
How to Use This Calculator
Simple Mode (Recommended for SIPs)
- Select investment frequency (Monthly, Quarterly, etc.)
- Enter recurring investment amount
- Set start and maturity dates
- Input total maturity value
- Get instant XIRR calculation
Best for: Regular SIP investments, systematic withdrawals, mutual fund returns
Advanced Mode (For Complex Scenarios)
- Add individual cash flows with dates
- Use negative values for investments
- Use positive values for returns
- Include all transactions and timing
- Calculate precise XIRR
Best for: Irregular investments, multiple entry/exit points, complex portfolios
Frequently Asked Questions (FAQ)
What is the difference between CAGR and XIRR?
CAGR (Compound Annual Growth Rate) is used for simple investments with a single initial and final value, while XIRR (Extended Internal Rate of Return) is used for complex investments with multiple cash flows at different times. CAGR is simpler to calculate but less accurate for SIP investments, while XIRR provides more precise returns for irregular cash flows.
When should I use CAGR vs XIRR?
Use CAGR when: You have a single lump sum investment, want to compare investments over the same time period, or need a simple growth rate calculation. Use XIRR when: You have SIP investments, multiple entry/exit points, irregular cash flows, or need the most accurate return calculation considering timing.
How accurate is the XIRR calculation?
Our XIRR calculator uses the Newton-Raphson iterative method, which is the industry standard for XIRR calculations. It provides highly accurate results for most investment scenarios. However, accuracy depends on the quality of your input data - ensure all cash flows and dates are correct for best results.
Can I use this calculator for mutual fund SIP returns?
Absolutely! This calculator is perfect for mutual fund SIP returns. Use the Simple Mode and select "Monthly" frequency, enter your monthly SIP amount, set the start and end dates, and input your current portfolio value. The calculator will automatically generate all the cash flows and calculate your XIRR.
What do negative and positive values mean in XIRR?
Negative values (-): Represent money going out (investments, purchases, fees).Positive values (+): Represent money coming in (returns, withdrawals, dividends). For example, if you invest âš10,000 monthly and get âš150,000 back, use -âš10,000 for each investment and +âš150,000 for the return.
How does investment frequency affect XIRR?
Investment frequency affects XIRR because it determines the timing of cash flows. Monthly investments have more frequent cash flows than quarterly or yearly investments, which can impact the overall return calculation. More frequent investments generally provide better dollar-cost averaging benefits.
Is XIRR the same as annualized returns?
Yes, XIRR provides annualized returns, but it's more sophisticated than simple annualization. XIRR considers the exact timing of each cash flow and uses an iterative method to find the rate that makes the Net Present Value (NPV) of all flows equal to zero. This makes it more accurate than simple annualized calculations.
Can I compare CAGR and XIRR results?
While you can compare the numerical values, remember that CAGR and XIRR measure different aspects of returns. CAGR shows simple annual growth for lump sum investments, while XIRR shows annualized returns for complex cash flows. For fair comparison, use the same metric for similar investment types.
What if my XIRR calculation fails?
If XIRR calculation fails, check that: 1) You have both positive and negative cash flows, 2) All dates are valid, 3) Cash flows span a reasonable time period, 4) The final value is realistic. For very short periods or unusual cash flow patterns, consider using CAGR instead, or break down your investment into simpler components.