All mutual fund returns such as CAGR or XIRR show you the past returns of the mutual fund. CAGR is a representation of the compounded growth of your mutual fund investments. It shows the fund’s average annual growth or decline over a specific time. CAGR doesn’t give you a clear picture of the volatility of the equity mutual fund. CAGR works best on a point-to-point basis such as lump sum investments, but where there are different cash inflows and cash outflows, like in SIPs, CAGR is not the right measure. The concept of Rupee Cost Averaging is one of the biggest benefits of investing in Equity Funds through SIP. XIRR is a method used to calculate returns on investments where there are multiple transactions happening at different times like SIPs. Using the XIRR formula for every SIP installment or liquidation, gives you an understanding of your overall mutual fund investment's current value.

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Disclaimer: These are not any recommendations for any funds or stocks and are meant only for educational purposes.

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