Published Jun 16, 2026 4 Min Read

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Introduction

When comparing CAGR vs XIRR vs Absolute Return, the right metric depends on your investment method. Absolute Return works best for short periods, CAGR is useful for lumpsum investments held over multiple years, and XIRR is designed for SIPs or investments with multiple cash flows.

  • Absolute Return: Measures total percentage gain or loss without considering time.
  • CAGR: Shows the annualised growth rate of a lumpsum investment over more than one year.
  • XIRR: Calculates annualised returns when investments and withdrawals happen on different dates.
  • Minimum SIP: Rs. 100 per month on the Bajaj Broking website.
  • Fund choice: Access to 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, and thematic categories.
  • Regulation: SEBI regulates mutual funds, while AMFI promotes industry standards and transparency.

You can start your mutual fund investment journey on the Bajaj Broking website after completing mandatory KYC, explore 4,000+ schemes, and begin a SIP from Rs. 100 per month.

What is Absolute Return in mutual funds?

Absolute Return shows how much your investment has gained or lost in percentage terms. It does not consider how long you stayed invested.

Formula:

Absolute Return = ((Current Value − Investment Amount) ÷ Investment Amount) × 100

Example

You invest Rs. 1,00,000 and the value grows to Rs. 1,20,000.

Investment amountCurrent valueAbsolute Return
Rs. 1,00,000Rs. 1,20,00020%

Absolute Return is most useful when you want to check returns over a short period, usually less than one year.

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It tells you the average annual growth rate of a lumpsum investment over a period longer than one year.

CAGR assumes your investment grows at a steady rate every year. Actual mutual fund returns may vary from year to year.

When should you use CAGR?

  • Lumpsum investments
  • Investment periods longer than one year
  • Comparing different mutual fund schemes
  • Measuring annualised growth

Example

Investment amountFinal valueTime periodCAGR
Rs. 1,00,000Rs. 1,50,0003 yearsAnnualised growth rate

CAGR helps you compare funds on a common yearly basis even when investment durations differ.

What is XIRR for SIP Investments?

XIRR stands for Extended Internal Rate of Return. It is used when money is invested on different dates.

Since every SIP instalment enters the market at a different NAV, CAGR cannot accurately calculate SIP returns. XIRR solves this problem by considering both the amount invested and the date of each investment.

When should you use XIRR?

  • SIP investments
  • Additional purchases made at different times
  • Partial redemptions
  • Investments with multiple cash flows

Most mutual fund statements show XIRR for SIP investments because it reflects actual investment timing.

CAGR vs XIRR vs Absolute Return – Key differences

FeatureAbsolute ReturnCAGRXIRR
Considers time periodNoYesYes
Annualised returnNoYesYes
Suitable for lumpsumYesYesYes
Suitable for SIPNoNoYes
Considers multiple cash flowsNoNoYes
Best use caseShort-term performanceLong-term lumpsum investmentsSIP and staggered investments

This table explains the key difference between CAGR XIRR and Absolute Return in mutual funds. Each metric answers a different question, so no single measure is always better.

CAGR vs XIRR vs Absolute Return: How to use them correctly

Choosing the right return metric helps you understand your investment performance more accurately.

Use Absolute Return when:

  • Your investment period is less than one year.
  • You want a simple gain or loss percentage.
  • Time is not important to your analysis.

Use CAGR when:

  • You invested a lumpsum amount.
  • The investment period is more than one year.
  • You want annualised returns.

Use XIRR when:

  • You invest through SIPs.
  • You make multiple investments on different dates.
  • You want the most accurate annualised return.

For most SIP investors, XIRR gives the clearest picture of performance because it considers every contribution separately.

Important points to remember

FactorDetail
Minimum SIPRs. 100 per month on the Bajaj Broking website
KYC requirementMandatory before investing as per SEBI regulations
Investment modesSIP and lumpsum available for most schemes
Fund availability4,000+ mutual fund schemes
Risk disclosureSEBI requires a colour-coded riskometer ranging from Low to Very High

Mutual fund returns are market-linked and not guaranteed. Past performance does not guarantee future results.

Conclusion

Understanding CAGR vs XIRR vs Absolute Return can help you evaluate mutual fund performance correctly. Use Absolute Return for short periods, CAGR for long-term lumpsum investments, and XIRR for SIPs or investments made on multiple dates.

Before investing, review the fund's objective, risk level, and SEBI-mandated riskometer. You can explore 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, thematic categories, and NFOs on the Bajaj Broking website after completing your KYC requirements.

Frequently asked questions

Is XIRR better than CAGR for evaluating SIP returns?

Yes. When comparing CAGR vs XIRR vs Absolute Return, XIRR is generally better for SIP returns because it considers the amount and date of every instalment. Since each SIP purchase happens at a different NAV, XIRR provides a more accurate annualised return figure than CAGR. The Bajaj Broking website and most mutual fund statements use XIRR for SIP performance reporting.

How do I calculate XIRR for my SIP in Excel?

You can calculate XIRR in Excel using the XIRR function. Enter all SIP investment amounts with their corresponding dates, add the current portfolio value as the final cash flow, and use the formula XIRR(values, dates). This method reflects the actual timing of your investments and withdrawals.

Can CAGR be negative?

Yes. CAGR can be negative if the final value of your investment is lower than the original investment amount. A negative CAGR indicates that your investment has declined on an annualised basis over the holding period. Mutual fund returns remain market-linked and can move up or down depending on market conditions.

Why does my mutual fund statement show XIRR and not CAGR for my SIP?

Your mutual fund statement usually shows XIRR because SIPs involve multiple investments made on different dates. CAGR assumes a single investment and cannot accurately capture staggered cash flows. On the Bajaj Broking website and across the mutual fund industry, XIRR is the standard method used to evaluate SIP performance because it reflects real investment timing.

Mutual funds are regulated by SEBI, while AMFI promotes industry standards and transparency. Always review the SEBI-mandated riskometer, which ranges from Low, Low to Moderate, Moderate, Moderately High, High, and Very High before investing.

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