Why your SIP return differs from the fund's return

Two numbers, one fund

Open any fund page and you will see a three-year return. Open your own account and your SIP in the same fund shows a different return, sometimes wildly different. Neither is a mistake. They measure two different people: someone who invested one lump sum three years ago, and someone who has invested every month since.

Understanding the gap saves you from two errors: thinking your fund is broken, or thinking your SIP is a magic trick.

A worked example

This is an invented NAV path, an illustration and not a forecast. Over three years a fund's NAV starts at ₹100, falls by ₹3 a month for a year to ₹67, stays at ₹67 for a year, then climbs ₹4 a month to ₹115 at the end of month 36. You invest ₹10,000 on the first of each month for 36 months.

The fund barely moved, 15% in three years, while the SIP gained about 48% on the money put in. The reason is the middle of the path: the SIP kept buying at ₹67 to ₹80 and those units gained about 70% on the recovery. A lump sum put in on day one never got the chance to buy at those prices.

Turn the path upside down, with the market rising for two years then falling in the third, and the SIP would look worse than the fund, because most of your units would have been bought near the top. Same fund, same NAVs, a different story. Try your own numbers in our XIRR calculator and the SIP calculator.

Why the two numbers are different in kind

1. Holding periods differ. Your first instalment has been invested for 36 months; your last for one. A fund's three-year return has one holding period. XIRR treats each instalment as its own dated cash flow and finds the single yearly rate that explains them all; see the XIRR glossary entry and the guide to absolute return, CAGR and XIRR.

2. CAGR assumes a lump sum. The CAGR formula needs one start and one end. A SIP has neither, so CAGR on a SIP gives a misleading figure. Use XIRR for a SIP and CAGR for a lump sum or for the fund itself.

3. Start date. A fund's return is quoted for fixed windows ending today. Your SIP began on a particular day, and the first few instalments may have fallen in a good or a bad stretch. Windows shift the result; the rolling versus trailing returns guide shows how much.

4. Your plan may differ from the one quoted. Many fund pages quote the Direct plan or the best plan, and if your SIP is in a Regular plan you earned a bit less after the higher expense ratio. See direct vs regular plans.

5. Growth or IDCW. If you chose the payout option, your returns include cash received and a lower NAV, which complicates the comparison. See growth vs IDCW.

6. Small frictions. A small stamp duty on purchases, any exit load on units you sold, and the NAV on the day your money actually reached the fund (see cut-off timings) all nudge your result away from the quoted figure by small amounts.

7. Tax. Quoted returns are before tax. Yours, if you have redeemed, are not. As of October 2026, equity fund gains held over a year are taxed at 12.5% above ₹1.25 lakh a year, and 20% if sold within a year; see mutual fund taxation.

How to read your SIP number honestly

• Do not compare your XIRR to the fund's CAGR directly. They answer different questions. To judge the fund, compare its return with its category's over the same windows; to judge your SIP, look at your XIRR and ask whether you were disciplined.
• Beware of very high XIRRs on short SIPs. In a young SIP most of your money has been invested for weeks, and a few good weeks annualise into an eye-catching number. A 40% XIRR on a six-month SIP is arithmetic, not a forecast. The SIP returns by category post shows SIP figures across longer windows.
• Beware of very low ones too. A SIP started near a peak looks poor for a while and can recover. See a SIP started at the January 2026 peak.
• Judge over a full cycle. A SIP's real test is how it does across a rise and a fall, which is why the twenty-year SIP through crashes guide uses long windows.

A checklist when numbers disagree

1. Is the comparison like for like: XIRR with XIRR, CAGR with CAGR?
2. Are the windows the same dates?
3. Is it the same plan (Direct or Regular) and option (Growth or IDCW)?
4. Has any unit been redeemed or switched, which changes both returns and tax?
5. Is the SIP young enough that XIRR is noise?

If all five check out and a gap remains, the explanation is usually the one in the worked example: a path with a dip in the middle rewards the person who kept buying. That is the argument behind rupee cost averaging, and a reason to think twice before you stop a SIP in a crash.

Official sources. How mutual fund returns are to be calculated and displayed is governed by SEBI, and AMFI publishes scheme data and investor guides. Tax rules are on the Income Tax Department's portal.

This article is for education, not investment advice. The NAV path above is invented for illustration; rules change, so verify details before you act.