CAGR works when you invested once and redeemed once. The moment there are multiple instalments or withdrawals, CAGR is meaningless and you need XIRR. Both are here, with a plain-language rule for choosing.
If you used CAGR on a SIP, the number you got was wrong. Here is why, and what to use instead.
Did you invest once and take it out once? Use CAGR. Was there more than one transaction date? Use XIRR. That is the whole test. A SIP has twelve dates a year, so its return is an XIRR question and CAGR cannot answer it.
People often take total invested and final value and run CAGR over the full period. That silently assumes every rupee was invested on day one. In a SIP your last instalment was invested for one month, not ten years. XIRR weights each cash flow by how long it was actually invested, which is why it usually produces a lower — and correct — number.
“My investment doubled” means nothing without the time. Doubling in 3 years is 26% a year; doubling in 15 years is 4.7%. If a product is marketed on absolute return, convert it to CAGR before comparing anything.
