XIRR

XIRR is the right way to measure the return on an SIP, because you invested on many dates and each instalment was in the market for a different length of time. A simple average cannot handle that.

Why an SIP needs a special measure

In a SIP, your January instalment has been invested for the whole period, while your December one has barely had time to grow. Averaging the returns, or using a plain CAGR on the total, would be wrong, because it ignores how long each rupee was actually working. XIRR, extended internal rate of return, solves this by treating every instalment as its own small investment with its own start date, then finding the single annualised rate that ties all of them to your final value.

How to read it

XIRR gives you one percentage, an annualised return, that you can compare against a benchmark or another investment on a fair basis. A statement showing an XIRR of 14% means your SIP effectively grew at about 14% a year, accounting for the staggered timing. It works for irregular contributions and withdrawals too, not just a tidy monthly SIP.

Where to find it

You do not have to calculate it by hand. Spreadsheets have an XIRR function where you list each cash flow and its date, and most fund statements and apps show the XIRR of your investments for you. The rule of thumb stays simple: a single lump sum uses CAGR; anything invested across many dates uses XIRR.