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How to calculate returns on SIP of mutual funds

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How to calculate returns on SIP of mutual funds

Heres a DIY approach to calculate the returns on investment in mutual funds either as a lump sum or through a SIP.

Heres a DIY approach to calculate the returns on investment in mutual funds either as a lump sum or through a SIP.

The Sensex, over the past three years, has generated a compounded annual growth of about 14 per cent (as on August 8, 2016). However, the returns for someone who invested back in 2013 will understandably be different.

So how has been the performance of your mutual fund (MF) scheme? Lets look at some ways an investor can calculate returns on his investment, whether its a one-time lump sum or through asystematic investment planSIP).

It helps you to calculate the simple returns on your initial investment. What you need is only the initial and the current or the ending net asset value (NAV) of the scheme. In calculating the point-to-point or absolute return, the holding time does not play a role. So if your initial NAV was, say, Rs 20 and now after 3 years, it is Rs 40, the point-to-point return comes to 100 per cent!

Simply put, absolute return = (current NAV – initial NAV)/ initial NAV x 100

You may put this in excel sheet to calculate it. In any box, start by typing =

Use this formula to calculate returns when the holding period is less than 12 months.

Some may want to annualise the return generated when holding period is less than 12 months. Also referred to as effective annual yield, it is actually extrapolating the returns but not giving the true picture. If you need to annualise the returns, heres the formula:

((1 + Absolute Rate of Return) ^ (365/number of days)) – 1

You may put this in excel sheet to calculate it.

Illustration:The NAV of Rs 20 may shoot to Rs 25 in, say, 7 months, i.e., 210 days. The absolute return in this case is 25 per cent over 7 months, i.e., 0.25

Absolute return, therefore, as mandated by the Securities and Exchange Board of India (SEBI), is when the period is less than a year, and simple annualised return is shown when period is exactly a year.

When the time period is more than a year, CAGR is a better way to depict returns. Its basically a number that shows how the investment would have grown had it generated a steady return. In reality, however, returns may not be the same each year. CAGR, therefore, represents a mean annual growth rate that smoothens out the volatility in returns over a period of time.

Lets now see how CAGR can be quickly computed using an excel file. Here, we consider CAGR of investment made in MFs.

Assuming you had invested Rs 1 lakh in an MF three years back at an NAV of Rs 20. Now, the NAV is Rs 40.

=(((ending-value/beginning-value)^(1/number-of-years))-1*100

Formula: =(((ending-value/beginning-value)^(12/number-of-months))-1*100

Similarly, if you know the NAV and the number of days, then use

Formula: =(((ending-value/beginning-value)^(365/number-of-days))-1*100

Cash inflows and outflows may not always be evenly matched and instead these could be at irregular intervals. For example, in a money-back plan or in a mutual fund SIP. XIRR is a function in Excel for calculating internal rate of return or annualized yield for a schedule of cash flows occurring at irregular intervals.

In a SIP, you keep investing regularly over a long period and get back the maturity amount upon exit. SIP investments happen on a pre-decided date and even the amount is fixed, and depending on the NAV of the scheme on that day, you get certain number of units. Hence, you keep accumulating units from the day your SIP starts. On the day you exit the scheme, i.e., redeem your total units, you get the maturity amount, which is NAV (of redemption day) multiplied by total units (on redemption day).

Now, to know how much returns ones scheme has generated, you may use the XIRR (a function in excel). Its simple and one doesnt even require the NAV of any date.

SIP of Rs 5,000 a month with redemption amount of Rs 31,000

(For better understanding, only six months considered)

Step1:In column A, enter the transaction dates on the left side

Step 2:In column B, enter SIP figure of 5000 as a negative figure as its an outflow

Step 3:Against the redemption date (Column A), enter redemption amount (Column B) (31000)

Step 4:In the box below 31000, type in:

XIRR, or the return on ones SIP investments, comes to 11.88 per cent.

In response to query by ET Wealth reader Mr. Parag P:

What if one adds lumpsum amount during SIP, how do calculate XIRR(2)

If any lump sum amount is added, insert date (in new row at the right place) and amount (a negative figure as its cash outflow) ex. If on 10th April, then new row after 1st April. Result changes accordingly.

What is SIP is already completed and no further investment in after SIP has stopped, how do calculate XIRR

(%)Mirae Asset Tax Saver Direct-G-0.585.069.727.3122.40Invest NowMirae Asset Tax Saver Reg-G-0.764.608.755.8120.75Invest NowMotilal Oswal Long Term Equity Fund Direct-Growth

ELSS-2.593.815.04-6.2516.15Invest NowFeatured

ELSS-0.807.9211.254.3915.79Start SIPMotilal Oswal Focused 25 Fund Direct-Growth

Large Cap0.265.749.531.5413.92Invest NowDHFL Pramerica Gilt Direct Plan – Growth

Gilt0.392.265.468.397.32Invest NowDSP Midcap Direct Plan-Growth

Mid Cap-2.206.376.59-6.4214.87Start SIPDHFL Pramerica Hybrid Debt Fund Direct Plan-Growth

Conservative Hybrid0.332.816.188.689.46Invest NowDSP Focus Direct Plan-Growth

Multi Cap-0.536.779.383.1511.89Start SIPMotilal Oswal Multicap 35 Fund Direct-Growth

Multi Cap-1.563.267.59-3.7214.76Invest NowMotilal Oswal Midcap 30 Fund Direct-Growth

Mid Cap-2.694.716.57-3.399.28Invest NowDHFL Pramerica Large Cap Fund Direct Plan-Growth

Large Cap-0.344.0510.035.2213.38Invest NowDSP Small Cap Direct Plan-Growth

Small Cap-3.437.032.53-17.308.22Start SIPDSP Equity Opportunities Direct Plan-Growth

Large & MidCap-2.045.948.020.0315.44Start SIPDSP Credit Risk Direct Plan-Growth

Credit Risk0.232.350.06-0.705.11Start SIPMotilal Oswal Long Term Equity Fund Direct-Growth

ELSS-2.593.815.04-6.2516.15Invest NowDSP Tax Saver Direct Plan-Growth

ELSS-0.807.9211.254.3915.79Start SIPDSP Liquidity Direct-Growth

Liquid0.581.773.697.597.21Start SIPICICI Prudential Savings Fund Direct Plan -Growth

Low Duration0.352.044.268.007.86Invest NowDSP Savings Direct Plan-Growth

Money Market0.211.854.017.946.87Start SIPDSP Strategic Bond Direct Plan-Growth

Dynamic Bond-0.192.545.498.866.98Start SIPDSP 10Y G-Sec Fund Direct-Growth

Gilt with 10 year Constant Duration0.391.895.238.747.04Start SIPDSP Bond Direct-Growth

Medium Duration-0.042.573.595.217.36Start SIPDSP Short Term Direct Plan-Growth

Short Duration-0.022.114.487.797.46Start SIPDSP Ultra Short Fund Direct Plan-Growth

Ultra Short Duration0.441.923.016.136.94Start SIPDSP Equity Savings Fund Direct-Growth

Equity Savings0.054.975.483.239.00Start SIPDSP Dynamic Asset Allocation Fund Direct-Growth

Dynamic Asset Allocation0.501.974.887.269.42Start SIPDSP Regular Savings Direct Plan-Growth

Conservative Hybrid-0.354.203.03-1.016.83Start SIPDSP Equity & Bond Direct-Growth

Aggressive Hybrid-1.345.618.512.9412.77Start SIP

– Returns less then 1 year are absolute and above 1 year are annualised.

– Returns of 1 year are absolute and above 1 year are annualised..

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