How to Calculate SIP Returns
Calculating SIP returns accurately requires using XIRR (Extended Internal Rate of Return), which accounts for both the timing and amount of each SIP instalment. Simple absolute return or CAGR calculations are not suitable for SIPs because different instalments have been invested for different durations. XIRR gives the true compounded annual return on your entire SIP investment.
Step-by-Step XIRR Calculation for SIP
- Open Microsoft Excel or Google Sheets.
- In Column A, list all SIP payment amounts as negative numbers (e.g., -5000 for each Rs 5,000 monthly SIP).
- As the last entry in Column A, add the current portfolio value as a positive number (e.g., +150000).
- In Column B, enter the corresponding dates for each SIP payment.
- For the last entry (portfolio value), enter today's date in Column B.
- In an empty cell, enter the formula: =XIRR(A1:A25, B1:B25).
- The result is your XIRR (annualised return). For example, 0.1200 means 12% annual return.
XIRR Calculation Example
A 24-month SIP of Rs 5,000 per month (total invested: Rs 1,20,000). Current portfolio value: Rs 1,48,000.
- Enter -5000 for each of 24 SIP dates and +148000 as the last entry with today's date.
- XIRR result: approximately 21% per year (this example reflects strong market performance).
Alternative: Using Investment Platform's Return Calculator
Most modern investment apps (Groww, Zerodha Coin, Paytm Money) display your portfolio XIRR automatically without requiring manual Excel calculations. Look for "XIRR" or "Annualised Returns" in your portfolio section. Note: some platforms show "absolute return" (total gain %) or "CAGR" instead; ensure you are reading the XIRR figure for the most accurate comparison.
Benchmark Your SIP Returns
| Category | Reasonable Long-Term XIRR Expectation |
|---|---|
| Nifty 50 index SIP (10+ years) | 11-13% XIRR |
| Active large-cap SIP | 12-15% XIRR |
| Mid-cap fund SIP (7+ years) | 14-18% XIRR |
| Small-cap fund SIP (10+ years) | 15-20% XIRR (high volatility) |
Key Takeaway
XIRR is the only accurate method to calculate SIP returns because it accounts for cash flow timing. Use Excel's XIRR function for manual calculation or let your investment platform calculate it automatically. Benchmark your XIRR against the fund's index category to assess whether your fund is adding value. Use the Lemonn app to track real-time portfolio XIRR and make informed decisions about your SIP investments.
