How to Calculate SIP Returns

How to Calculate SIP Returns

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Find out how to calculate SIP manually or with the help of SIP calculators.

Key Takeaways

  • SIP is a popular Mutual Fund investment method.
  • You can calculate your Mutual Funds SIP returns using online SIP calculators.
  • SIP calculator gives you a rough estimate of the maturity value of your SIP Mutual Fund investment.
  • You can also calculate returns manually using a simple formula.
  • SIP calculator does not compute expense ratios and exit loads.

If you wish to invest in Mutual Funds but do not have a lump sum amount to spare, you can invest via SIP. An abbreviation for Systematic Investment Plan, SIP allows you to invest in Mutual Funds in instalments. You can compute the returns from your SIP investment before you begin the SIP with the help of SIP calculators. Let us find how to calculate SIP returns using SIP Calculators.

What is a SIP Calculator?

A SIP Calculator is an online simulation tool that enables you to compute the potential returns on your SIP Mutual Fund investment. This tool uses variables like your preferred investment amount and investment tenure, which can be weekly, fortnightly, monthly, or quarterly along with the expected returns rate to compute the SIP returns.

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How SIP is Calculated Using the Calculator

Here are the steps on how to calculate SIP returns with the help of an online SIP calculator:

  1. Find a generic online SIP calculator on the internet.
  2. Enter your preferred SIP amount.
    Select your preferred investment tenure between monthly and quarterly. If you want to invest weekly or fortnightly, calculate the monthly investment amount and select the monthly tenure option.
  3. Now enter your expected returns rate per annum, ensuring you choose a reasonable rate in accordance with market conditions.
  4. Lastly, enter your preferred SIP investment tenure in years. Some calculators may ask you to enter the number of SIP instalments. So, if you choose five years, it will be 5x12 = 60 SIP instalments.

Once you enter these details, the SIP calculator will instantly compute the expected returns rate.

How To Calculate SIP Manually?

If you wish to corroborate the accuracy of the SIP calculator, you can also calculate the potential returns manually. Use the below formula to compute the returns from your SIP investment manually.

FV = P [ (1+i) ^ n-1] * (1+i)/i

Where:

  • FV = Future value or maturity amount of the investment.
  • P = Monthly SIP investment amount
  • i = Compounded returns rate
  • n = duration of the investment (in months)
  • r = Expected returns rate

Now let us say that you choose to invest INR 2,000 (P) every month for 24 months (n) at an expected Returns Rate (r) of 12%, on which you stand to earn compounded returns (i) of 0.01%.

At INR 2000 per instalment over 24 instalments, your total investment amount is INR 48,000. At a 12% returns rate, your final calculation will look something like this:

FV = 2000*[(1+0.01) ^ 24-1] * (1+0.01)/0.01.

At this rate, you will earn INR 54,486 when the SIP matures after2 years of investment.

Final note

Knowing how is SIP calculated and how to calculate SIP returns online or manually helps you make informed investment decisions. Since the investment market is volatile, the SIP calculator cannot compute the exact returns rate. Moreover, the calculator does not account for expense ratios and exit loads it gives you a rough estimate of the total value of your SIP investment.

Download the digibank by DBS app to get started with your SIP.

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*Disclaimer: This article is for information only. We recommend you get in touch with your income tax advisor or CA for expert advice.

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