CAGR Vs XIRR Vs Absolute Return: Which Mutual Fund Return Measure Should You Use?

Checking a mutual fund portfolio and seeing a return percentage may appear straightforward. However, the method used to calculate that figure can significantly affect how the investment's performance is understood. Three commonly used measures are Compounded Annual Growth Rate (CAGR), Extended Internal Rate of Return (XIRR) and absolute return. Each serves a different purpose, depending on when and how the money was invested. Choosing the appropriate measure can therefore provide a clearer picture of actual portfolio growth.