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finance2026-07-163 min read
SIP Calculator: How SIP Returns Are Calculated
Learn the formula behind mutual fund SIP return calculation. Master the difference between absolute returns and XIRR. Calculate your compound wealth!
Systematic Investment Plans (SIPs) allow you to invest small sums regularly in mutual funds. But how exactly are these future values calculated?
The SIP Future Value Formula The future value of an SIP is calculated using the formula: FV = P x [((1 + i)^n - 1) / i] x (1 + i)
Where:
- P is the monthly SIP installment amount.
- i is the periodic rate of return (annual return rate / 12 / 100).
- n is the total number of monthly payments.
Absolute Returns vs CAGR vs XIRR - Absolute Returns: The simple percentage gain on total invested capital. Used for short-term reviews. - CAGR: Compound Annual Growth Rate. Measures year-on-year growth. - XIRR: Extended Internal Rate of Return. The gold standard for SIPs since cash outflows happen on different dates.
Calculate your projected mutual fund wealth automatically using our free online SIP Calculator.