Guides / CAGR vs XIRR vs Absolute Return: Which One to Use
CAGR vs XIRR vs Absolute Return: Which One to Use
1 Oct 2026Three numbers are often used to describe investment returns. They answer different questions.
1. Absolute return
The total gain as a percentage of the amount invested. If ₹1 lakh becomes ₹2 lakh, the absolute return is 100%. It ignores how long it took, so it is hard to compare.
2. CAGR
The steady yearly rate that would take you from the starting value to the final value. Taking ₹1 lakh to ₹2 lakh in 5 years gives a CAGR of 14.87% a year. Use it for a single investment held for a period. Try it in the CAGR Calculator.
3. XIRR
The yearly return when you invest at different times, such as a SIP. Take a ₹10,000 monthly SIP for 5 years that is now worth ₹8.5 lakh:
| Item | Value |
|---|---|
| Invested | ₹6 lakh |
| Gain | ₹2.5 lakh |
| Absolute return | 41.7% |
| XIRR | about 13.9% a year |
Here the absolute return looks high, but much of the money was invested for only a short time, so the yearly return is lower. Check yours with the XIRR Calculator.
Which should you use?
- One investment, one date in and out: CAGR.
- SIPs or regular deposits: XIRR.
- A quick total gain: absolute return, but do not use it to compare different periods.