ET Mutual Funds Explains: When to use CAGR, XIRR or IRR to calculate your mutual fund returns?

An investor before choosing a mutual fund scheme to invest always looks for the past performance of that scheme. Ever wondered why the returns are expressed in different nomenclatures? Why are they written as CAGR, IRR or XIRR? ETMutualFunds made it easy for the first time investors to understand what these nomenclatures mean and how one should calculate them.

Compounded Annual Growth Rate (CAGR)

CAGR calculates annual growth rate of an investment over a particular period of time. This measure is the most common tool used to measure/calculate returns generated by a mutual fund scheme. It shows the average annual return delivered by a fund over a specific period of time assuming that the returns are compounded every year.