November 11, 2025
4 mins read
A Systematic Investment Plan (SIP) is one of the most prevalent methods for investing in mutual funds. In an SIP, you invest a predetermined amount, whether it is ₹1,000 or ₹5,000, on a monthly basis. Over a period of time, these small contributions accumulate into a substantial amount due to the effect of compounding.
However, calculating SIP returns is different from what is done with lump sum investing. In a lump sum investment, you invest a lump sum, and the return will depend exclusively on that amount. In SIPs, you invest on many occasions, on various dates. Each date and amount will affect the return.
This is why investors have various methods, such as XIRR or CAGR, to accurately measure SIP returns. Let's try to understand how this works.
SIP returns are the capital (or loss) you make from regularly investing in a mutual fund. To accurately calculate investment returns, we need to take into account:
How often you invest (monthly, quarterly etc)
The duration of investing (years or months)
How the mutual fund performed over that time
SIP returns are subject to the volatility of the investment rather than lump sum investment returns.
SIP returns are the profit (or loss) you make from investing in a mutual fund regularly. To calculate these returns, we need to consider:
How often you invest (monthly, quarterly, etc.)
How long you invest (years or months)
The performance of the mutual fund during that period
Unlike lump sum investments, SIP returns are influenced by market ups and downs. For example, if you start investing when markets are high and later they fall, your average return will look different compared to someone who invested during a low market.
So, knowing how to calculate SIP returns helps you see if your financial goals are on track.
There are two main ways to calculate SIP returns. Both are useful but serve different purposes.
XIRR (Extended Internal Rate of Return) is the most accurate method for SIPs. This is because it considers the actual dates of each SIP payment.
For example, if you invest ₹5,000 every 10th of the month, XIRR checks each payment date and calculates how much that money has grown by the time you stop investing or redeem.
Since SIPs are spread across months or years, XIRR gives the truest picture of annualised returns. Investors often use Excel or Google Sheets for this calculation.
CAGR (Compounded Annual Growth Rate) is another method. CAGR gives you the average annual growth of your investment, as if it grew at a fixed rate every year.
Formula:
CAGR = (FV / PV)(1 / n) – 1
In the above formula: FV = future value | PV = present value | n = number of years.
CAGR is simple to use. For example, if you invested ₹60,000 and it grew to ₹1,00,000 in 5 years, CAGR will tell you the average yearly growth rate.
But remember, CAGR does not consider each SIP date. That’s why it is less precise for SIPs but still useful for a quick estimate.
There are two main formulas you should know:
XIRR handles multiple payments on different dates. It looks at both cash outflows (your SIP instalments) and inflows (your redemption or final value).
Formula in Excel:
XIRR = XIRR(values, dates)
values = list of SIP amounts (negative) and redemption/final amount (positive)
dates = exact dates of those amounts
Since manual calculation is complex, most investors use Excel, Google Sheets, or online calculators.
CAGR is better if you treat all SIP payments like one lump sum invested at the start.
Formula:
CAGR=(Ending ValueBeginning Value)1N−1CAGR=(Beginning ValueEnding Value)N1−1
Where:
Ending Value = current value of investment
Beginning Value = total amount invested
N = number of years invested
This shows average yearly growth but does not track exact dates.
Here’s how you can calculate SIP returns yourself:
Collect SIP details – Write down all SIP amounts, dates of investment, and the current or final value of your mutual fund.
Select a method – Use XIRR for more accurate results or CAGR for a simple estimate.
Enter cash flows – In Excel or calculators, enter SIP amounts as negative values and the redemption/final amount as a positive value. Add exact dates.
Use the function – Apply the XIRR formula in Excel or use an online SIP calculator.
Read the result – The result will be shown as an annualised percentage return (like 12% per year). This shows how well your SIP has performed.
You don’t have to do all the maths by hand. Many tools can calculate SIP returns quickly.
Online SIP Return Calculator
Mutual fund websites and financial portals provide free SIP calculators. Just enter:
Your monthly SIP amount (₹5,000, for example)
Your investment duration (say, 5 years)
The expected rate of return
The calculator will show your total corpus and estimated return.
Excel or Google Sheets
Both offer built-in functions like XIRR(). By entering SIP dates and amounts, you can calculate accurate annualised returns. This method is popular among investors who track their portfolios manually.
Mobile Apps
Many investment apps have SIP tracking features. They fetch real-time fund values and automatically calculate returns using XIRR. This is the easiest way if you invest online.
Additional Read: SIP calculator
Many investors make small mistakes when calculating SIP returns. These mistakes can lead to wrong results. Here are some to avoid:
Ignoring dates: Always enter actual SIP dates. Skipping this can make the return look wrong.
Using CAGR instead of XIRR: CAGR is for lump sum. SIPs should be calculated with XIRR.
Wrong final value entry: The last redemption or fund value must be entered as a positive cash flow.
Missing SIP instalments: If you skipped or stopped an SIP, you must reflect it in your calculation.
By avoiding these errors, your return calculation will be much more accurate.
Calculating SIP returns is key to checking whether your investment plan is working. Two main methods are used: XIRR and CAGR.
CAGR shows the average yearly growth but does not consider SIP dates. XIRR, on the other hand, is perfect for SIPs because it includes actual payment dates.
You can calculate returns using Excel, Google Sheets, online calculators, or mobile apps. All make the process simple.
By learning these methods, you will understand your returns better and make smarter decisions about your financial future.
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An effective way to compute SIP returns is by using XIRR, which takes into account the time and size of every investment. While CAGR does not support multiple cash flows, XIRR is better equipped for analyzing returns from systematic investments.
XIRR considers multiple cash flows at varying dates, so it is appropriate for SIPs involving regular investment. CAGR considers a single one-time investment and does not account for frequent contributions so it may give incorrect results in SIP returns.
Yes, you can manually compute SIP returns through formulas such as XIRR or CAGR. Manual computation is complicated and tedious, particularly for SIPs with more than one contribution. Tools such as Excel or online calculators make computation easier.
Yes, online SIP calculators are reliable since they generally employ the XIRR method, which considers changing dates of investment and amounts. The calculators give accurate results, provided that the information fed into them is correct and recent.
Factors affecting SIP return accuracy include incorrect transaction dates, missed or skipped installments, rounding errors, and failure to include the final redemption value properly. Additionally, taxes, exit loads, and incorrect input data can also impact the results.
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