Three numbers all claim to answer “how did this investment do?”, and they routinely disagree by several percentage points on the same holding. None of them is wrong. They are answers to three different questions.
Absolute return
Plain point-to-point growth, not annualised. The fund was worth 100, now it is worth 109, the absolute return is 9%.
This site uses absolute return for every period under a year — the 1M, 3M, 6M and YTD figures. That is deliberate. Annualising a six-month number means multiplying it out as though the next six months will repeat it, which is a forecast, not a measurement.
If you ever see “+18% (annualised)” attached to a three-month period, you are looking at a marketing figure.
CAGR
The compound annual growth rate is the single constant yearly rate that would have taken the starting NAV to the ending NAV. This site uses it for every period of a year or more — 1Y, 3Y, 5Y, 10Y and since inception.
Its strength is comparability: two funds’ 5Y CAGRs are directly comparable because both have been reduced to the same unit.
Its weakness is that this reduction throws away the entire path. Two funds with an identical 5-year CAGR can have had completely different journeys — one a steady climb, the other a 50% collapse followed by a violent recovery. You would have experienced those very differently, and quite possibly sold out of the second one. That missing information is exactly what the risk figures exist to restore.
There is a second trap. A fund’s “3-year return” is point-to-point from one specific date to one specific date. Shift the start by a month and the number moves, sometimes a lot, because you have swapped one market regime for another. This is why rolling returns — the same window slid across the whole history — are a fairer test than any single headline figure.
XIRR
CAGR assumes one amount went in on one date. The moment there is more than one cash flow, it cannot describe the result at all.
XIRR is the annualised rate that makes a series of dated cash flows balance. It weights every rupee by how long that particular rupee was actually invested, which is what makes it the correct measure for a SIP, for a portfolio you have added to and withdrawn from, and for anything with an irregular schedule.
XIRR is the annualized return that makes the net present value of all dated cash flows equal to zero — it accounts for irregular timing and amounts, unlike a simple absolute or CAGR return.
Why your XIRR is lower than the fund’s return
This is the most common source of confusion, and usually nothing has gone wrong.
If a fund returned 15% CAGR over five years but your SIP into it shows an XIRR of 11%, the explanation is that most of your money has not been invested for five years. Your first instalment has; the one you paid last month has been invested for a month. The fund’s 15% describes a rupee present for the whole period. Your 11% describes your actual money.
The reverse happens too. A SIP that ran through a long fall and into a recovery can show an XIRR above the fund’s point-to-point return, because the instalments landed disproportionately at low NAVs.
Neither number is lying. The fund’s CAGR measures the fund. Your XIRR measures your decisions about when to put money in.
Which one to use
- How this fund performed, and how it compares with its peers — CAGR, over a year or more.
- How it did over a short recent stretch — absolute return, not annualised.
- What your money actually earned — XIRR.
- Whether the record is robust or an artefact of the start date — rolling returns.
Every one of these on this site is computed from public AMFI NAV history rather than taken from a fund house; the exact formulas, the conventions and the constants are set out on the methodology page, and every term is defined in the glossary.
Key takeaway
Absolute return measures a short stretch honestly, CAGR makes funds comparable by discarding the path, and XIRR is the only one that measures your money. When your XIRR is below the fund’s CAGR, usually nothing is wrong — most of your money simply has not been invested as long. Match the measure to the question before comparing anything.
Terms used here
More in Module 5 — Advanced metrics, taxation and wealth architecting
Mutual fund taxation decoded: short-term vs long-term capital gains
Equity, debt, hybrid and ELSS are taxed under different rules, and the rules changed twice in three years. What applies now, and to which of your units.
Decoding alpha and beta: manager skill versus market risk
Beta is how much market you took; alpha is what you got beyond it; R² tells you whether either number means anything. Read in that order, they catch a closet index fund.
Rolling returns, and the start date that flatters a fund
A trailing return runs from one day to one day, and moving either changes it. What sliding that window across the whole history shows that a single figure cannot.
Sharpe and Sortino: measuring risk-adjusted returns
Volatility, Sharpe, Sortino and maximum drawdown measure four different things, and only one of them predicts whether you will still be holding in year three.
Treynor and information ratio: advanced tools for comparing funds
One prices market risk, the other prices the decision to differ from the index. For choosing between active funds in one category, the information ratio is the most relevant number on the page.
Tracking error and standard deviation in passive funds
One measures how much a fund moves, the other how much it moves differently from its index — and neither is the number that actually reaches your returns.
What is portfolio turnover ratio? Decoding a fund’s trading activity
How much trading it took to produce the returns, the invisible costs that come with it, and why the number is a consistency check rather than a verdict.
Credit risk and yield-to-maturity in debt funds
A high YTM is a description of the risk taken, not a forecast of the return earned. How to read it beside the rating profile, and what a credit event permanently does.
Factor investing and smart beta: beyond market-cap weighting
A disclosed, rules-based tilt at a fraction of active cost — and active risk by another name, with long stretches of underperformance that are the reason the premium exists.
Estate planning for mutual fund investors: transmission and legalities
Nomination, a will and joint holding — what each one actually does, what transmission involves without them, and why inheriting does not reset the capital-gains clock.
The psychology of a market crash: behavioural finance that survives contact
Loss aversion, herding and action bias are not character flaws — they are the default settings. The pre-commitments that work, because judgement in the moment does not.