Key Takeaways
- Calculators use the future value of an annuity formula for estimates.
- Inputs are the instalment, the assumed periodic return, and the number of instalments.
- Absolute return compares final value to money invested.
- XIRR annualises returns while respecting the date of each cash flow.
On this page
The estimation formula
For a fixed monthly SIP, the future value is estimated as:
FV = P × [ (1 + i)n − 1 ] / i × (1 + i)
where P is the monthly instalment, i is the assumed monthly return (annual rate ÷ 12), and n is the number of instalments. The final (1 + i) reflects investing at the start of each period.
Illustration: ₹5,000 a month for 10 years
Assume an illustrative 12% annual return, i.e. 1% a month, with each instalment invested at the start of the month. Future value = 5,000 × [(1.01)120 − 1] ÷ 0.01 × 1.01 ≈ ₹11,61,695. You invested ₹6,00,000, so the estimated gain is about ₹5.62 lakh — an absolute return of about 94%.
Three very different "returns" describe this one SIP:
- Absolute return 94% — true but ignores that the money went in over ten years.
- CAGR on the total invested ≈ 6.8% — (11.62 ÷ 6)1/10 − 1 — misleadingly low, because it pretends the whole ₹6 lakh was invested on day one.
- XIRR = 12% — the correct annualised figure, because it weights each ₹5,000 by the time it was actually invested.
Why your statement may differ
Real SIPs buy units at a different NAV every month, so the actual return is whatever the sequence of NAVs produced — not a smooth 12%. Expense ratios are already reflected in NAV; exit loads and capital-gains tax are not, and reduce what you receive on redemption. Dividend/IDCW payouts, if taken in cash, are also outside the fund's growth figure.
Which calculator to use
To project a plan under an assumed rate, use the SIP calculator. To measure what an existing SIP has actually earned, export the transaction dates and amounts from your statement and enter them in the XIRR calculator. Our CAGR vs XIRR guide explains why the two measures differ.
Measuring real returns
The formula above assumes a constant return. Real SIPs have many cash flows on different dates and variable growth. To measure the actual annualised return of such a series, investors use XIRR, which finds the single rate that makes all dated cash flows balance. For a single lumpsum over a period, CAGR does the same job more simply.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
Related Calculators
Related Guides
CAGR vs XIRR Explained
CAGR measures the annualised growth of a single investment between two dates. XIRR extends this to multiple cash flows on different dates, making it the right tool for SIPs.
taxHow Are Mutual Fund Gains Taxed?
Profit on redeeming mutual fund units is a capital gain. How it is taxed depends on the fund's classification (equity-oriented or not), how long each unit was held, and the rules in force in the year you redeem. This guide explains the moving parts without quoting rates, because they change.
investingHow Does a SIP Work?
Each SIP instalment buys mutual fund units at that day's price. Over time you accumulate units at an averaged cost, and staying invested lets returns compound.
investingSIP vs Lumpsum Investing
A SIP spreads investment across time to average out entry prices, while a lumpsum invests everything at once. Each suits different situations and cash-flow realities.
investingWhat Is a Step-Up SIP?
A step-up SIP increases your monthly investment by a set percentage or amount each year, usually to match rising income, which can meaningfully grow the final corpus.