They answer different questions, and the difference is the cash flows.
CAGR takes one amount in, one amount out, and the time between them. It asks: at what steady annual rate would this single sum have grown into that one? It has no way to represent money that arrived in instalments, because it only has two dates to work with.
XIRR takes every dated cash flow — each instalment you paid, on the day you paid it — plus the value today, and finds the one annual rate that reconciles all of them. That is what a SIP is: a series of dated payments, each of which has been invested for a different length of time.
Why the distinction matters in practice
Your first instalment has been invested for the full period. Your most recent one has been invested for a month. Treating the total you have paid in as though it all went in on day one understates the return; treating it as though it all went in recently overstates it. XIRR is simply the arithmetic that does not have to choose.
The gap between the two is not small on a long SIP, which is why a figure quoted without saying which measure produced it is not really a figure. Our XIRR calculator takes dated amounts and returns the rate.
What neither of them tells you
Both describe what already happened. Neither is a forecast, and a past rate is not a property the investment carries forward. Costs, taxes and your own timing all sit outside the number too — which is the reason a review looks at the goal and the holding's role in it, not only at the percentage.
Answered by Radiant advisory desk. General information, not personal advice — your own policy wording and circumstances govern.