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How to calculate your SIP returns?

Are you not sure of how to calculate the returns generated by your SIP? Or are you not sure about how to find out which SIP is good for you based on its returns? Whatever the case may be, you can easily calculate the returns of a SIP just by brushing up your 10+2 grade’s mathematics skills and using an excel sheet. However, if you want an instant result to see how much you can generate by investing in a SIP, you can always use a SIP Calculator.

What is SIP return?

Systematic investment plans are becoming widely popular in recent times especially with millennials putting their savings into it and with the advent of technology. Even though technology has made researching new SIP schemes, and their details easier, calculating and comparing the returns of a SIP is still crucial for wisely choosing the scheme that will suit your portfolio the best. So, SIP return is nothing but the profit or loss generated by the investment over a particular period.

How can you calculate it manually?

Suppose, you invested Rs. 500 every month for 12 months and at the end of 12 months, you get Rs. 7200. So, here your total investment in the SIP is Rs. 6000 (12×500). The profit made on the investment is Rs. 1200 ( 7200-6000).

If you calculate the overall return, it will be = 1200/6000*100= 20%.

However, when you are investing in a SIP, you are not making a lump sum investment which you can use as the denominator for dividing the profit generated. Thus, the return percentage also changes. While 20% is the overall return the real return can be calculated using an excel sheet. Here you go –

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sip

So, as you can see in the excel sheet above, Rs. 500 has been deposited/ invested every month starting from 10/07/2021 and on 10/07/2022, a year later, the investment provided a return of 39.03%.

You have to use the XIRR formulae to calculate the return on SIP over a given time. Then you need to multiply the result by 100 to get the percentage value.

While it is easy to calculate the SIP return manually, it can be easier if you do it with a mutual fund calculator.

What is a SIP Return Calculator?

SIP return calculator is a tool that helps calculate the return generated by a SIP. Mutual fund calculators come in both formats – SIP calculators and lumpsum calculators. If you are investing in a SIP, you can simply use the SIP calculator to find out how much your investment can grow over a period given the amount you want to invest or you find how much you need to invest where you have a set goal for the future.

SIP return calculator uses the same formula as in the above excel sheet but with the SIP calculator, you do not have to enter all the dates and amounts multiple times. You just need to set the start date, select the number of years you want to invest, the date of SIP investment every period, and the amount. Then choose the type of return you want. Whether you want to invest aggressively, or moderate or low risk according to the rate of return will be determined.

Alternatively, you can enter the amount you want to accumulate after a certain period say 5 years, and then you select the type of investment – the rate of return and click on enter, you will find out how much you need to invest every month/ or quarterly to achieve that amount in the future.

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How can it help in the calculation of SIP Return?

  • As you can see in the above example using an excel sheet, you need to enter all the data, then set up the formula, and then you will get the result. With a SIP calculator, you do not have to put so much effort. So, this tool saves your time.

  • Furthermore, you can find out how much you need to invest over time to reach a financial goal in simple steps.

  • Then you do not have to pay a penny for using the SIP calculator. It is readily available online for use.

Conclusion

SIP calculators are one of the best investment tools at present, especially for retail investors who don’t have much time or knowledge about the returns. They can easily find out how much they can accumulate by saving a small amount every month in a SIP.

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