Why Someone Else’s Returns Mean Nothing For Your Life
Your money story is not copy-pasteable - so neither are your returns.
Every time you speak to someone about investing, sooner or later the conversation turns into a performance flex.
“My portfolio grew 24% CAGR (Compound Annual Growth Rate) over 5 years.”
“I’m getting 37% XIRR (Extended Internal Rate of Return) from mutual funds.”
“Crypto gave me 52% CAGR.”
These numbers sound impressive. They sound scientific. They sound like truth.
But here’s the reality:
No one can convince you of anything using CAGR or XIRR. Because neither of them can be meaningfully replicated in real life.
Let’s break this down logically.
What CAGR and XIRR Actually Mean
Before dismissing them, let’s understand them.
On paper, both are mathematical tools.
But only one of them has any real-world relevance: XIRR.
Because none of us invest only once and forget about it.
We invest monthly, quarterly, randomly - whenever we have money.
But that also makes XIRR deeply personal.
Why No Two People Can Ever Have the Same XIRR
XIRR depends on three things:
When you invested
How much you invested
What you did along the way
Which means your XIRR is a pure outcome of your personal decisions under real-world conditions.
Let’s say you and I both invested in the same fund. Same fund, same duration. Will we get the same returns?
Absolutely not. Because:
I may have paused investing during a job loss.
You may have panic sold during a crash.
I may have added lumpsum investments during dips.
You may have withdrawn money for emergencies.
We have different cashflows and different risk appetites.
We didn’t invest on the same dates with the same amounts.
So what are we even comparing?
Your XIRR is not a badge of investing skill. It is a diary of your behavior.
The Illusion of Convincing People With Big Numbers
When someone quotes high XIRR numbers to convince you to invest like them, remember this:
They are showing you results, not constraints.
They are showing performance, not context.
They are showing you their story, not your path.
You can’t copy their outcome unless you can copy:
Their income level
Their expense pressure
Their family responsibilities
Their emotions during corrections
Their timing of investments
Their conviction at market bottoms
Which you can’t. No one can.
So quoting XIRR to someone is like saying:
“If you had lived my life, behaved like me, earned like me, saved like me, and invested like me - you would also get my returns.”
That’s meaningless. Real life doesn’t work that way.
So What Should You Focus On Instead?
Your wealth growth depends less on CAGR and more on your system - how you behave with money.
Instead of chasing other people’s returns, focus on:
A consistent monthly investment discipline
A clear plan for dips and corrections
Rules for asset allocation
Behavior control during volatility
A long-term view without emotional exits
Because in the markets:
Time > Timing.
Discipline > Drama.
Systems > Stories.
Final Thought
CAGR and XIRR are not evil. They’re just misunderstood. Use them to evaluate your own progress, not to compare yourself to others.
And the next time someone tries to impress you with their return numbers, ask them just one question:
“Can I copy your life decisions?”
If the answer is no, then the number doesn’t matter.
Disclaimer
This is educational content, not financial, investment, tax, or legal advice.
Zenca shares perspectives and frameworks to help you think clearly - your decisions are your own.
Please think independently and do your own research.