When you invest in mutual funds, one question always comes to mind:
“Is my return good enough?”
Most investors see a number called XIRR in their app but don’t clearly understand what it means or how much XIRR is actually good. This blog explains everything in simple words, without technical jargon.
What Is XIRR in Mutual Funds? (Quick Recap)
XIRR (Extended Internal Rate of Return) shows the annualized return on your mutual fund investment when money is invested at different times.
It is mainly used for:
- SIP investments
- Multiple lump-sum investments
- Partial withdrawals
That’s why XIRR is more accurate than absolute return.
How Much XIRR Is Considered Good?
There is no single “perfect” XIRR, but here is a clear benchmark you can use:
XIRR Return Meaning
- Below 8% XIRR → Poor or underperforming
- 8% – 10% XIRR → Average, close to fixed deposit returns
- 10% – 12% XIRR → Good and healthy return
- 12% – 15% XIRR → Very good performance
- Above 15% XIRR → Excellent, but comes with higher risk
For most long-term equity investors, 12% XIRR is considered ideal.
Good XIRR Based on Mutual Fund Type
Equity Mutual Funds
- Good XIRR: 12% – 15%
- Long-term goal: Wealth creation
- Risk level: High
Hybrid Mutual Funds
- Good XIRR: 9% – 11%
- Balanced risk and return
Debt Mutual Funds
- Good XIRR: 6% – 8%
- Low risk, stable returns
Index Funds
- Good XIRR: 11% – 13%
- Depends on market performance
Is Higher XIRR Always Better?
Not always.
A very high XIRR:
- May be due to short-term market rallies
- Can drop sharply in market corrections
- Often comes with higher volatility
A stable 12–14% XIRR over 5–10 years is far better than a sudden 25% XIRR for one year.
Good XIRR for SIP Investors
If you are investing through SIP:
- 10%+ XIRR → You are on the right track
- 12%+ XIRR → Very good SIP performance
- 15%+ XIRR → Excellent, but review risk
Remember, SIP XIRR improves with time. Short-term SIPs may show lower XIRR initially.
Why Your XIRR May Be Low
XIRR being low can be attributed to several factors. Some of these include that the markets are currently undergoing some form of a correction. Given that you started investing through SIPs fairly recently in relation to NAV volatility, or you invested near market highs.
However, just because your XIRR is lower than expected does not indicate that your fund is performing poorly. What matters far more is consistency over the long term.
CLICK – What Happens If You Invest ₹10000 Every Month for 20 Years
When Is XIRR Appropriate to Evaluate?
Avoid judging XIRR:
- In less than 1 year
- During market crashes
Ideal evaluation period:
- Minimum: 3 years
- Best: 5–10 years
XIRR vs Fixed Deposit Returns
- FD average returns: 6% – 7%
- Inflation range: 5% – 6%
If your XIRR is below 8%, your money is barely beating inflation. Equity mutual funds should always aim to outperform inflation by a meaningful margin.
Should You Exit a Fund With Low XIRR?
You should NEVER exit a fund solely because of:
- Poor 1-year XIRR
- Temporary market downturn
Consider exiting only if:
- The fund consistently underperforms its benchmark
- 3–4 years of poor performance
- Major change in fund manager strategy
CLICK – What Is XIRR in Mutual Fund? A Simple Guide for SIP Investors
Final Conclusion: What XIRR Is Good?
For most Indian investors:
- 10% – 12% XIRR → Good
- 12% – 15% XIRR → Very good
- Above 15% XIRR → Excellent, but higher risk
The real goal is long-term consistent growth, not chasing high numbers every quarter.
Frequently Asked Questions (FAQs)
Is 10% XIRR good for mutual funds?
Yes, 10% XIRR is considered good, especially for conservative or hybrid funds.
Is 15% XIRR realistic?
Yes, usually during strong market cycles or aggressive equity funds.
Can XIRR be negative?
Yes, during market crashes or short-term investments.
Is XIRR better than CAGR?
XIRR is better for SIPs. CAGR is better for one-time investments.