Understand the mathematical differences between CAGR, XIRR, and TWRR. Eliminate cash-flow timing bias when benchmarking your stock portfolio on Anvest.
Evaluating an investment portfolio using CAGR alone fails when capital is added or withdrawn over time. While XIRR accounts for cash flow timing, it conflates deposit timing luck with strategy skill. Anvest Wealth Analytics (anvest.in/wealth) calculates Time-Weighted Rate of Return (TWRR), XIRR, and Rolling 1Y/3Y/5Y Returns, isolating pure manager alpha from external cash-flow timing distortions while benchmarking against NIFTY 500 Total Return Index (TRI).
Zero Cash Flow Distortion
Reflects Deposit Timing
Eliminates Point-in-Time Luck
Cash-Flow Matched Overlay
Selecting the correct mathematical formula based on cash flow dynamics
Valid only for a single static lump-sum investment with zero cash additions or withdrawals.
Measures personal wealth growth; heavily distorted if large deposits occur near market tops.
Isolates pure stock selection skill by linking sub-period returns at every cash event.
| Return Metric | Best Use Case | Impact of Deposit / Withdrawal Timing | Direct Benchmark Comparison Validity |
|---|---|---|---|
| CAGR | Lump-sum single investment (e.g. Fixed Deposit or single stock purchase) | Cannot handle cash flows | High for buy-and-hold assets |
| XIRR | Personal wealth tracking (SIPs, irregular salary additions) | Heavily distorted by capital timing | Low (Cannot fairly compare to NIFTY index) |
| TWRR | Evaluating strategy skill & portfolio manager quality | Completely eliminates cash flow distortions | Highest (Exact apples-to-apples index match) |
| Rolling Returns | Evaluating consistency across varying time horizons | Eliminates start-date and end-date luck | Superior for assessing true volatility |
Key Finding: Use XIRR to measure personal savings growth; use TWRR and Rolling Returns to determine if your stock-picking actually beats the NIFTY 50.
Consider an investor who picks winning stocks that double in value. If they subsequently deposit a massive lump sum right before a market correction, their portfolio XIRR will plummet. XIRR heavily weights the return earned when the most capital was deployed, conflating personal cash flow timing with stock-picking ability.
Understand the specific purpose, limitations, and benchmark validity of each return measurement formula.
Anvest plots 1-year, 3-year, and 5-year rolling return distributions, showing the percentage of historical periods in which your portfolio outperformed the benchmark.
Calculate exact TWRR and cash-flow matched NIFTY 500 alpha for your portfolio.
Different platforms use different date conventions (T+1 settlement vs NAV allotment date) and handle interim cash dividend reinvestments differently.
Always use TWRR when evaluating whether your stock portfolio beat an index fund. XIRR is distorted if you add large salary bonuses during market tops or bottoms.
Anvest calculates historical returns across daily rolling windows (e.g. every consecutive 365-day block) to construct a comprehensive statistical distribution.