Key answer
Use CAGR for a single amount held untouched. Use XIRR for anything with more than one dated cash flow — a SIP, top-ups, partial withdrawals. For a real portfolio, XIRR is the number that matches your account.
CAGR: one lump, start to end
Compound Annual Growth Rate is the steady yearly rate that would take one starting amount to one ending amount over a period. It's perfect for a single investment held untouched — and misleading the moment you add money midway, because it ignores when each rupee went in.
XIRR: many cash flows, real dates
XIRR (extended internal rate of return) is the one annual rate that makes all your dated inflows and outflows balance. A rupee invested three years ago and a rupee invested last month are weighted by how long each was actually at work. For a SIP, a portfolio with top-ups, or any real investing, XIRR is the honest number.
Why the two can disagree a lot
If you invested most of your money recently, a big headline CAGR can hide a modest XIRR — because most of your rupees haven't had time to compound. A strong-looking fund shouldn't flatter a portfolio you mostly just bought.
A worked example
You invest ₹10,000 every month for 3 years — ₹3,60,000 in total — and it's now worth ₹4,30,000.
- Treat it as one lump that grew ₹3.6L → ₹4.3L and the CAGR reads about 6%/yr — but that's wrong, because your later instalments were invested for months, not years.
- Weight each of the 36 instalments by how long it was actually invested and the XIRR is about 12%/yr.
Same money, same value — the honest annualised return is XIRR, roughly double the naïve figure.
How OmniAsset treats this. OmniAsset computes money-weighted (XIRR-style) returns from your actual contribution dates, so returns reflect when your money was really at work — never a flattering single-lump CAGR. Where a cost basis or price is missing, the return is marked partial and covers only the holdings it can measure.
Sources
- Money-weighted return (IRR/XIRR) — the standard cash-flow-dated return used across finance
- OmniAsset methodology — how returns are computed, on one signed snapshot — /methodology/
Common questions
What's the difference between XIRR and CAGR?
CAGR is the growth rate of a single amount held from start to end; XIRR is the annual rate that reconciles many cash flows on different dates — the correct measure when you've invested at different times, like a SIP.
Which should I use for a SIP?
XIRR. A SIP is many investments on many dates, and only XIRR weights each by how long it was invested. CAGR would misstate a SIP's return.
Which does OmniAsset use?
OmniAsset computes money-weighted (XIRR-style) returns from your actual contribution dates, so returns reflect when your money was really at work.
See your real, date-weighted returns — not a flattering headline number.
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