XIRR (Extended Internal Rate of Return) is the single annual rate at which all your cash flows — money you put in and money you took out or still hold — would have to grow so that they exactly balance today. Because it weights every rupee by how long it was actually invested, it is the correct way to measure the return of a SIP or any investment with multiple dates.

Each investment is entered as money going out on a specific date, and each redemption (or the current value of what you still hold) as money coming in. The calculator then finds the rate r that solves:

Σ amounti ÷ (1 + r)(daysi ÷ 365) = 0

There is no closed-form formula, so the tool solves it numerically — the same approach spreadsheets use for their XIRR function, using an actual/365 day count.

Absolute return ignores time entirely. CAGR annualises a single lump sum between two dates. XIRR generalises CAGR to many dated cash flows — for a single investment and a single redemption, XIRR and CAGR give the same answer. If you invested monthly, CAGR on the total invested will understate your real return because most of the money was not invested for the full period. Read the CAGR vs XIRR guide for worked examples.

You invest ₹10,000 on the 1st of every month from January to December 2025 (₹1.2 lakh in total) and the holding is worth ₹1.3 lakh on 1 January 2026. The gain is ₹10,000, or 8.3% of the money invested — but the XIRR is about 15.7%, because the average rupee was invested for only about six months. Treating the ₹1.2 lakh as if it had been invested on 1 January 2025 and applying CAGR gives 8.3%, which understates what the money actually earned.

A second case with uneven flows: ₹2 lakh invested on 1 January 2024, a further ₹1 lakh on 1 January 2025, and a redemption of ₹3.6 lakh on 1 January 2026. Absolute gain ₹60,000 on ₹3 lakh (20%); XIRR about 11.5% a year, since the second lakh was invested for only one of the two years.

The dates. Moving a large cash flow a few months changes the annualised figure noticeably, and getting a sign wrong (an investment entered as a redemption) makes the result meaningless. Short total periods amplify everything: a 5% gain over three months annualises to over 21%, which is mathematically correct but not a return you have 'earned' for a year. For a single lump sum and one exit date, XIRR equals the CAGR; for a regular SIP, compare the figure with the SIP calculator's assumed-rate projection to see how reality differed from the plan.

If you still hold the investment, the last cash flow must be its current value on today's date, entered as money coming in. Leaving it out — or entering the total invested instead — is the most frequent reason the calculator reports no solution or a return near −100%. Dividends or payouts you received along the way are also inflows and belong in the list on the dates you received them.

A 12% XIRR means your money grew at the equivalent of 12% per year for the time it was invested. It is comparable with a fixed deposit rate or a fund's stated annualised return over the same period. It is not a prediction of future returns, and short periods (under a year) can produce very large or very small annualised figures that are not meaningful.