How to Calculate Returns on SIP Investments manually?


The thought behind making investments is to gain profitable returns over time. Today, we have a plethora of investment instruments available in the market. Despite the different options, mutual fund scheme remains one of the most popular investments that provide reasonable returns to the audience.

One such scheme that is in demand among most young investors is the Systematic Investment Plan (SIP). But what is SIP?

The Systematic Investment Plan, which is commonly referred as SIP, allows you to invest a fixed amount in mutual funds. The amount is deducted directly from your savings bank account on a periodic basis and is directed towards mutual funds chosen by you.

Ideally, investing in SIPs at a young age is a great way to receive better returns in the future. In simple terms, the earlier you begin, the higher are your SIP returns.

If you have made a SIP investment lately, are you sure that the amount is sufficient to accomplish your future financial objectives? Below, we have discussed in detail about how to calculate your SIP returns.

How to Calculate SIP Returns? You can calculate SIP returns manually as well as with the help of the SIP calculator. For calculating SIP returns manually, you should know the basic functionality of Microsoft Excel. Excel comes loaded with different mathematical functions/formulas that make complex calculations easy for the user.

For calculating SIP returns using Excel, you have to use the XIRR (a function in excel). When you sit to calculate your returns on investment, make sure that you have the following details handy:

1.      Your SIP amount

2.      Date of your SIP investment

3.      Redemption date

4.      Maturity amount

You will understand the calculations better with the help of an example:

For instance, assume that you started a SIP recently. The information related to your SIP investment is as follows:

·         Your SIP amount = Rs. 5,000 for a month

·         Maturity amount = Rs. 31,000

·         Starting date of your SIP investment = 01/01/2020 (dd/mm/yyyy)

·         Last date of your SIP investment = 01/06/2020 (dd/mm/yyyy)

·         Redemption date = 01/06/2020 (dd/mm/yyyy)

Note: In the given example below, we have taken only six months into consideration for your better understanding.

Now, follow the steps given below:

Step 1: Open an Excel Sheet.

Step 2: Enter all your transaction dates in Column A. Here, the transaction dates will be the date on which the SIP is deducted from your bank account.

Step 3: Enter the SIP amount in negative value in Column B against each transaction date. Since we are calculating SIP returns for six months, there will be six values.

Step 4: Fill the maturity amount of Rs. 31,000 (Column B) against the redemption date (Column A)

Step 4: In a new row below this table, enter the XIRR function =XIRR (B1:B7, A1:A7)*100 in the box below 31,000

Step 5: Once done, hit ‘enter’

Your final answer (XIRR), which is the return on your SIP will come to 11.88 percent.

People who are unaware of Excel functions will find it difficult to calculate SIP returns through it. The chances of errors are high when you are doing the same.

So, to eliminate the risks of errors, you can try a different approach. Another way to calculate the returns is with the help of a SIP return calculator. It is an online tool that helps you to obtain approx. return value on your SIP investments.

To get estimated returns on the SIP, submit the following data:

1.      Monthly invested amount

2.      Period of investment

3.      Expected annual returns

The tool also allows you to calculate inflation-adjusted returns. Check whether the SIP calculator that you are using has this functionality as this tool differs from company to company.

All in all, calculating returns before making a SIP investment will help you plan better. It comes in handy, especially when you’re making a significant investment in mutual funds. The calculation may look complex. But, trust us, it’s not! All you need to do is enter the right details to get the correct value. So, put on your math glasses and happy investing!


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