How are SIP investment returns calculated? SIP returns are calculated based on the amount invested, the period of investment, and the performance of the mutual fund. Since SIP involves multiple investments at different times, the Extended Internal Rate of Return (XIRR) is commonly used to calculat...
The reason is that CAGR works only for calculating returns on a point-to-point basis. When there are multiple cash flows (like in the case of SIP), you need to use XIRR because the returns for each cash flow will differ. XIRR helps you calculate a single return percent for all cash ...
Lump sum uses CAGR (compound annual growth rate), while SIP uses XIRR (Extended Internal Rate of Return). It is because CAGR works for point-to-point returns. But with multiple cash flows, as with SIP, returns differ for each. XIRR gives a single return percent for all cash flows. Your...