How to calculate SIP returns using an SIP calculator?

SIPs or Systematic Investment Plans have become a popular way for Indians to invest in mutual funds. SIPs allow you to invest a fixed amount periodically, such as monthly or quarterly, to take advantage of rupee cost averaging. This means you buy more units when prices are low, and fewer units when prices are high.

Over time, SIPs can generate solid returns through the power of compounding. To determine how your SIP is actually performing, you need to calculate your SIP returns. This can be done using an easy online SIP calculator. Here’s how to determine your overall SIP returns-

Gather your SIP details

You will need to enter some key details about your SIP into the calculator including-

SIP start date– The date you began your first SIP investment. This is used to calculate your total investment period.

Monthly SIP amount- The fixed amount you are investing each month through the SIP in your chouce of mutual fund investment.

Annual increase in SIP amount (if any)- If you increase your SIP amount each year, enter the percentage increase. For example, 10% annually.

Fund name– The name of the mutual fund scheme you are investing in. This is used to fetch the fund’s historical performance to calculate your returns.

Fund option- Whether you are investing in the fund’s growth or dividend option. Returns are calculated differently for each.

Initial fund NAV– The starting NAV or price of the fund units when you began your SIP. This is used as the starting point to measure fund performance during your investment period.

Enter your SIP details and the SIP calculator will fetch fund performance

With the details you entered, the SIP calculator will fetch the annual NAV history of your fund over the time you have been investing. It uses this to determine the average annual return of your fund each year. Your personal SIP returns are calculated based on the annual returns and your monthly investments.

View your estimated current fund balance and total investment value

The SIP calculator will estimate your current fund balance – the total value of all units purchased through your SIP so far. It will also show your total investment amount – the sum of all SIP installments you have paid. The difference between these two amounts is your total gains.

See your annualized SIP return

One of the most important metrics is your annualized SIP return. This is your total return annualized based on your SIP investment period. For example, if you have been doing an SIP for 5 years, your annualized return is the total return you would get in one year at the same rate of return. This allows you to compare your SIP return to other investments and to benchmark indices.

SIPs remain one of the best ways for Indian investors to get into a regular habit of putting money aside for higher returns in the long run. By using an SIP calculator, you can see the real results of your discipline and patience, which will keep you motivated to continue building your mutual fund investment wealth over time through the ups and downs of the market. Stay focused on your SIP and maximize your returns!

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