What does XIRR mean?
When measuring returns on investments over multiple years with multiple investments, the Absolute return doesn't give an accurate picture.
The absolute return shows the growth of your investment without considering the investment time period. It is simply the percentage difference in the money you had before investing and the money you have now.
Refer this post on TradingQ&A to know how to correctly measure the returns of your mutual fund investments.
When you have made multiple investments (at different points in time), in the same financial instrument, SIPs for example,
XIRR (extended internal rate of return) is the measure of return that has to be used for accurate depiction of the growth of your investment.
XIRR is relevant only if there are multiple investments at different points in time, and the duration of investment is more than 1 year.
XIRR is an aggregation of multiple CAGRs. To know more about CAGR, click here. XIRR is like CAGR except that it is more relevant to SIP investments.