Systematic Investment Plans (SIPs) have become a popular investment choice for many due to their disciplined approach and potential for good returns. However, understanding how returns are calculated in an SIP can be perplexing for many investors. Here, we’ll delve into the nuances of SIP return calculations, making it easy to grasp the essentials without any fluff or theatrics. We’ll also touch upon how tools like the SIP Calculator app from Bajaj Markets can simplify this process.

What is an SIP?


Before diving into the calculations, it’s important to understand what a Systematic Investment Plan (SIP) is. An SIP is a disciplined investment strategy that permits investors to invest a fixed amount of money regularly into mutual funds. Typically, these investments are made on a monthly basis, though they can also be made annually, quarterly, weekly, or even daily. The investment depends on the investor’s preference and the options provided by the mutual fund.

Basics of SIP Return Calculations


When calculating returns on SIP investments, two primary methods are often used: the Absolute Return method and the Compounded Annual Growth Rate (CAGR).

Absolute Return


Absolute Return is the total return on investment expressed as a percentage. It is straightforward and useful for understanding the overall growth of your investment. The formula to calculate Absolute Return is:

Absolute Return = Current Value of Investment – Total Amount / Total Amount Invested

This method does not account for the investment duration, making it a simpler, but less comprehensive metric.

Compounded Annual Growth Rate (CAGR)


CAGR represents the annual growth rate of an investment over a specified period. It provides a smoothed annual return, making it more insightful for long-term investments. The formula for CAGR is:

CAGR = (Current Value of Investment / Total Amount Invested) 1/n – 1

Here, n is the number of years. CAGR is preferred for comparing the performance of different investments over varying time periods.

The Role of SIP Calculator

Understanding and calculating these returns manually can be complex, especially with multiple investment periods and varying market conditions. This is where tools like the SIP Calculator available on Bajaj Markets comes in handy. 

Ease of Use


The SIP Calculator app provides a user-friendly interface. You can input your monthly investment amount, the duration of the SIP, and the expected rate of return. With just a few clicks, you can see detailed projections of your investment growth.

Accurate Projections


The app uses robust algorithms to compute the returns, taking into account various market factors. This ensures that the projections are as accurate as possible, giving you a clear picture of potential returns.



Manually calculating SIP returns, especially with fluctuating rates, can be time-consuming. The SIP Calculator appautomates this process, saving you valuable time and effort.

Factors Influencing SIP Returns


While the formulas are essential, understanding the factors that influence SIP returns is equally important:

Investment Duration


The longer you stay invested, the more you benefit from compounding. SIPs are typically recommended for long-term goals to maximise returns.

Market Conditions


Market volatility significantly impacts SIP returns. While SIPs help mitigate this by averaging out the investment cost. The overall market performance throughout the investment period is crucial in determining the final returns. Understanding this interplay is vital for investors.

Rate of Return


The expected rate of return, usually derived from historical data of the chosen mutual fund, significantly impacts the final returns. It’s important to set realistic expectations based on historical performance and market conditions.

Using SIP Calculators for Better Investment Planning


The SIP Calculator app from Bajaj Markets is designed to help investors make informed decisions. Here’s how you can leverage it effectively:

Setting Realistic Goals


By inputting different values, you can see how varying the monthly investment amount, duration, and expected return rate affects your final corpus. This helps in setting realistic financial goals.

Comparing Different Scenarios


The app allows you to compare different investment scenarios side-by-side. This can be particularly useful if you’re deciding between multiple mutual funds or investment strategies.

Tracking Progress


Regularly using the SIP Calculator app helps you track your progress towards your financial goals. You can adjust your investments if needed, based on the updated projections.

Understanding how returns are calculated in an SIP is crucial for any investor looking to make informed decisions. While the concepts of Absolute Return and CAGR are fundamental. Leveraging tools like the SIP Calculator app from Bajaj Markets can simplify the process and provide accurate projections. By taking into account factors like investment duration, market conditions, and the rate of return, you can plan your investments more effectively. 

In a world where financial decisions can often seem overwhelming, tools that simplify complex calculations are invaluable. The SIP Calculator app from Bajaj Markets is one such tool, empowering investors to make smart, data-driven decisions with ease.