Overview
No single performance number tells the full story. Read amount, timing, cash realisation, risk, fees, tax and inflation together.
Return measures answer different questions. The disciplined investor chooses the measure after understanding the cash flows, then reconciles income, appreciation, fees, tax and time instead of shopping for the most flattering number.
AssetsNest research desk
The Owl view
Every return number answers a narrower question than its label suggests. CAGR smooths endpoints, XIRR prices dated cash flows, MOIC counts value and real return measures purchasing power; none reveals risk or whether the cash is realised.
IRR for doubling in three years
The same 2.0× MOIC falls to about 7.2% annualised when it takes ten years.
funds failed to survive
Across SPIVA India's five categories, mergers and liquidations affected the 10-year comparison set.
Open source ↗Case file
Year-end 2025 scorecardSPIVA reports performance and survivorship together
A league table that removes merged or liquidated funds can overstate what an investor could have selected in advance. SPIVA's survivorship data makes the denominator visible and shows why a return database must include products that disappeared.
Before comparing CAGR, inspect who entered the sample, who survived and whether returns are net and time-matched.What the market often misses
- XIRR can reward the timing of cash calls even when total profit is unchanged.
- Income yield can include a return of the investor's own capital.
- Nominal return does not measure progress toward a cost that inflated faster than CPI.
Questions before acting
- Are all cash flows, fees and taxes included on their actual dates?
- How much of ending value is realised cash versus an estimate?
- What benchmark and inflation measure match the investment's job?
Topic 1 of 5
CAGR
CAGR is the constant annual rate that would turn a beginning value into an ending value over a period.
The part that changes the answer
It smooths the path and ignores interim volatility and cash flows. Use it for a single beginning and ending value, not irregular contributions or withdrawals.
Check the exact start date, end date and whether dividends are included.
₹10 lakh growing to ₹20 lakh in eight years has a CAGR of about 9.1%; it says nothing about interim drawdown or cash added along the way.
Use CAGR only for one start and end value with no external cash flows. Pair it with drawdown, volatility, liquidity and actual investor cash-flow return.
A smooth compound rate hides a path that required unbearable losses, or contributions are mistakenly treated as investment gain.
Topic 2 of 5
XIRR & IRR
IRR annualises a series of cash flows; XIRR uses their actual dates and is often more appropriate for irregular investments.
The part that changes the answer
The result is highly timing-sensitive and can be distorted by early distributions or delayed capital calls. Compare it with money multiples and cash actually received.
For SIPs, private funds and staggered cash flows, examine the full dated cash-flow schedule.
Invest ₹100 today, receive ₹20 in year one and ₹100 in year three: the dated return differs from a simple 20% gain because part of capital returned early.
Use actual dates, signs and net cash flows; distinguish project IRR, fund IRR and investor XIRR. Test multiple-solution problems and compare with MOIC.
Subscription lines or debt-funded distributions move cash earlier and raise IRR without increasing asset-sale proceeds.
Topic 3 of 5
MOIC
MOIC divides total value by invested capital and answers how many rupees of value exist per rupee invested.
The part that changes the answer
It ignores how long the investment took and may include unrealised valuations. A 2.0x result over three years differs materially from 2.0x over ten.
Separate realised distributions from manager-estimated residual value.
2.0× MOIC over three years is about 26% IRR; over ten years it is about 7.2%. MOIC measures magnitude, not speed.
Separate realised and unrealised value, gross and net, and cost basis from current mark. Pair MOIC with duration, DPI and loss ratio.
A high marked MOIC never becomes cash, or a respectable multiple arrives so late that it underperforms a lower-risk alternative.
Topic 4 of 5
Income vs appreciation
Income is cash paid during ownership; appreciation is the change in asset value.
The part that changes the answer
Interest, dividends and rent can support cash needs, while appreciation often depends on future sale. High distributions are not automatically economic income if they return investor capital.
Trace every distribution to operating cash flow, borrowing, asset sale or capital return.
An 8% distribution with a 10% capital decline produces roughly −2.8% total return before tax, not an 8% investment result.
Reconcile income source with operating cash, debt and return of capital; calculate price change, reinvestment, tax and distribution composition together.
Borrowed or capital-repayment distributions are called yield, while the asset base erodes and future income capacity declines.
Topic 5 of 5
Real return
Real return is the gain in purchasing power after inflation, and investor experience may also depend on fees and taxes.
The part that changes the answer
A useful approximation is nominal return minus inflation, while precise calculation compounds the two rates. Match inflation to the liability rather than using a headline index mechanically.
Judge success by progress toward the real-world goal, not the account statement alone.
A 9% nominal return with 6% inflation is about 2.8% real: 1.09 ÷ 1.06 − 1, before tax and fees.
Use realised after-tax return, relevant household inflation and the correct currency. Measure whether the liability's purchasing power improved.
A double-digit nominal return is celebrated in a high-inflation period even though fees, tax and living costs leave no real wealth growth.
India lens
What Indian readers should test
Indian SIPs, AIF drawdowns, property cash flows and listed investments need different calculations. XIRR is often appropriate for irregular dated flows, but the spreadsheet result is only as reliable as the cash-flow record and valuation entered.
Primary sources & further reading
Dated facts are linked to their source. Hypothetical calculations are labelled illustrative.
S&P DJI — SPIVA India Year-End 2025↗IPEV — 2025 private-capital valuation guidelines↗How AssetsNest researches and labels evidence →AssetsNest Investor Services — ARN 318691. This guide is educational and informational only. It is not personalised investment, legal or tax advice, an offer, recommendation or solicitation. Rules, products and taxation can change; verify current official documents before acting.