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Why your fund app's return differs from your real return

Your app says you are up 38%. A friend says their XIRR is 14%. A fund's page says it returned 18% last year. They are measuring different things, and it helps to know which question each number answers.

Four numbers, four questions

Absolute return

Total gain divided by total amount invested. If you put in ₹5 lakh over five years and it is now worth ₹6.9 lakh, that is 38%. It does not care whether the money was invested for five years or five months. For a long-running SIP it grows with the time you stay invested, regardless of the annual rate, so it cannot be compared with an FD rate or any other yearly figure.

A fund's trailing return

The 1-year, 3-year or 5-year figure on a fund's page describes the fund: what a lump sum invested exactly that long ago would have earned. It says nothing about when you bought. Two people in the same fund can have very different results depending on when their SIPs ran.

CAGR

The yearly growth rate of a single lump sum. Useful for a one-time investment, misleading for a SIP, because it cannot tell an instalment made last month from one made five years ago.

XIRR

The yearly rate that fits your actual cash flows on their actual dates. It is the closest thing to “what my money earned per year”. See XIRR in plain English for a worked example.

When two XIRR figures still disagree

Even when an app does show XIRR, it can differ from FolioQ's for ordinary reasons:

• Different funds included. An app usually sees only the investments made through it. A CAS includes every folio under your PAN at every fund house, including ones bought elsewhere years ago.
• Different valuation date. FolioQ values your holdings at the NAV printed on your statement, on the statement date. An app uses the latest NAV. In a volatile week the gap can be noticeable.
• Redeemed units. Some views count only what you still hold. Others include money you have already taken out. XIRR counts both: every rupee in and every rupee out.
• Missing history. If a transfer, switch or very old purchase is not recorded, any XIRR calculation suffers. FolioQ checks whether the transactions it read add up to the units your statement prints, and marks the result as an estimate when they do not.
• Plan type. Regular and Direct plans of the same fund have different NAVs, because a Regular plan includes a distributor commission. Make sure you compare like with like.