SIP Return Calculator
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I have already written an article on Systematic Investment Plan (SIP). So why a separate post on SIP return calculator?
Writing a separate post was necessary to explain a very important point about returns from SIP.
To explain the concept of returns from SIP, it was also obvious to code a SIP return calculator.
You can use this online SIP return calculator to get a feel of what I will explain in this blog post.
How this SIP return calculator was born?
One day I received a comment from my reader. The reader asked a very simple question.
“How much return can be generated from SIP in mutual fund?“.
All investors who invest in mutual funds through SIP route have asked this question, right?
From where do we get our answers?
Majority of us use moneycontrol to get the answer.
But there is a big fallacy in the way moneycontrol, or any other financial website represent this figure.
What they display as a result is not wrong, but it can mislead us.
In this article we will unearth this fallacy, and use a SIP return calculator which will help to eliminate our wrong interpretation.
How websites show the SIP returns?
There is a very nice SIP calculator of moneycontrol. Valueresearchonline also has a similar SIP calculator.
Lets use the SIP calculators of moneycontrol and Valueresearchonline to see what results they show.
Lets do this analysis for HDFC Top 200 Fund (G).
Result of Moneycontrol…
I have assumed the following for the analysis:
 Monthly SIP: Rs.1,000 per month
 Investment Time : 10 Years
Lets see what results are shown by moneycontrol
The SIP return calculator shows that by investing Rs.1,000/month for 10 years, HDFC Top 200 Fund (G) has generated 14.84% in last 10 years.
For common men what does it mean?
Their invested money, Rs.120,000 (Rs.1000/month x 10 years), will grow at rate of 14.84% for 10 years.
Do you agree with my above statement?
I am sure, majority will agree.
But here is the fallacy.
When Rs.120,000 grows @14.84% for next 10 years, it will become Rs.478,755 in 10 years.
But you can see yourself that, in reality, the invested money has appreciated from Rs.120,000 to only Rs.257,922 in 10 years.
This is a return (CAGR) of 7.95% per annum (and not 14.84%).
I have checked the same in valueresearchonline and they also display a similar SIP return as moneycontrol.
What is the problem with this SIP return?
The annualised return shown by these SIP return calculators have posed problems for me in the past.
I used to do some of my personal finance management calculations based on the return numbers displayed by these websites.
In this process, my return expectation from SIP was wrong and unreasonable.
As the actual net effective return from my SIP’s were much lesser, my personal financial calculations were going for a toss.
Though the websites were showing that, my mutual fund is giving the desired returns, but the actual value appreciation of my holding units (as shown in investment portfolio) was much smaller.
This prompted me to do some more in depth study on SIP returns.
The result is the development of this SIP return calculator.
This calculator tones down investors inflated expectation from their SIP’s.
What is the correct return of SIP?
The return shown by moneycontrol and other websites are not wrong.
But ones investment can yield those percentage points only if investment is done in lumpsum.
If investment is spread out in phases (like systematic monthly investments – SIP), the yield gets substantially reduced.
Lets understand this with an example:
Lumpsum:
 Invested money: Rs.120,000
 Investment Horizon: 10 Years
 Return: 84%per annum
 Appreciated value: Rs.478,755
SIP:
 Monthly Investment: Rs.1,000/month
 Total Investment: Rs.120,000
 Investment Horizon: 10 Years
 Return (Lumpsum): 14.84% per annum
 Appreciated value: Rs.275,925
 Net Effective return of SIP: 68%
What moneycontrol and other websites displays are only the return when investment is done in lumpsum.
Though it is not wrong, but it is liable to wrong interpretation by SIP investors.
So, how we can interpret the returns of moneycontrol etc websites:
Example:
 Time horizon: 10 Years
 Return (lump sum): 15%
A mutual fund whose return, when invested in lumpsum is 15%, will generate a SIP return of only 8.79% in 10 years.
You can also use the SIP return calculator provided in this blog to know the actual return of SIP.
How to use this calculator…
The SIP calculator of moneycontrol, valueresearchonline etc are great.
They can highlight “fund specific” returns.
If one is investing in HDFC Top 200 Fund (G), their calculator can highlight SIP return for this specific fund.
I personally like the calculator of moneycontrol as it divulges more details about SIP.
But even these great calculators has a small limitation (misleading return).
Their results are liable for wrong interpretation by common men like me and you.
Hence I decided to code a simple SIP return calculator which will highlight this limitation and give a more realistic result.
A combination of moneycontrol and getmoneyrich’s SIP return calculator will be the best.
The user can first use the calculator of moneycontrol. Note the “Return (CAGR)” which is being displayed there.
The second step will be to use the getmoneyrich’s SIP return calculator to get a more realistic picture of possible capital appreciation over time.
Example – utility of getmoneyrich’s SIP calculator:
Suppose one wants to invest in “HDFC Prudence Fund (G)” through SIP route. The objective of this person is to accumulate Rs.20,00,000 in next 10 years.
Before investing, the person wants to know how much SIP return this mutual fund has given in the past 10 years.
To know this, one goes to moneycontrol and calculates the past return. Result is like this:
Moneycontrol is showing that, HDFC Prudence Fund (G) has generated an annualized return of 16.77% in last 10 years.
So the person opens his excel sheet and does a small calculation.
Idea is to know how much monthly contribution he should put in SIP to build a corpus of Rs.20,00,000 in next 10 years.
Assuming 16.77% return, his calculation says he will need to invest Rs.6,500/month in SIP to build a corpus of Rs.20 lakhs in 10 years.
But this is a wrong assumption (..fallacy).
He then uses the SIP return calculator of getmoneyrich to obtain a realistic return figure.
HDFC Prudence Fund, whose return when invested in lumpsum is 16.77%, will generate a SIP return of only 9.99% in 10 years.
The result is shown below.
Please note the marked difference and correct yourself if you too were doing the same mistake.
The revised calculation says, he will need to invest Rs.9,600/month in SIP to build a corpus of Rs.20 lakhs in 10 years.
Conclusion
Net effective return of mutual fund, when invested through SIP route, is far lesser than when investment is made in lumpsum.
What most of the website display, is the return when investment is made in lumpsum.
Hence, it is important for SIP investors to correct their expectation before starting a mutual fund SIP.
I hope you like this article and its SIP calculator.
Please do put in your reactions in the comment section below…
Have a happy investing.
Indeed a nice post to have come across, I must admit that you have done a sip return calculator
Thank you for the post. I was having the same doubt regarding SIPs this post has cleared all my doubts..
Superb. Thanks for posting your comment.
It’s really nice article..
Will start reading all your articles to get upgraded myself.
Thanks a lot.
Thank you Girish for liking the work.
Nice information I myself maintaining my portfolio account in money control from last 6.5 years.