How do I calculate the return from a mutual fund invested as a monthly SIP of Rs. 5000 over a period of 3 years at a return rate of 20.4% per annum?
The projected amount for the same is calculated by this website. However, I am not being able to calculate the same myself by hand.
I used SIP calculator which returns Rs. 249660
A recurring deposit calculator returns Rs. 242754
I couldn't see the fund in your screenshot, but here is the one from the web link.
The one-year return can be calculated like so.
Also using a formula
a = d ((1 + r)^n - 1)/r
where
a is the future amount
d is the monthly payment (paid at month-end)
n is the number of months
r is the monthly interest rate
The annual interest rate is 14.4%
r = (1 + 14.4/100)^(1/12) - 1 = 0.011274
n = 12
d = 5000
a = d ((1 + r)^n - 1)/r = 63863.84
The same in Excel
The 3 year result is a little out, presumably some rounding inaccuracy
r = (1 + 19.3/100)^(1/12) - 1 = 0.0148146
n = 36
d = 5000
a = d ((1 + r)^n - 1)/r = 235556.95
A 3 year annualised return of 19.26% obtains the website figure, shown below.
r = (1 + 19.26/100)^(1/12) - 1 = 0.0147862
n = 36
d = 5000
a = d ((1 + r)^n - 1)/r = 235431.40
I would guess the interest rate in the calculations is 19.26% but the website shows the figure rounded to one decimal place, as 19.3%.
The biggest problem is that they are using historical returns, that means that they are using.
But you aren't modeling a 180,000 investment for three years. You have a 5,000 investment for 36 months another 5,000 for 35 months...
You have to know the interest rates for each of the 36 months....but you don't know them
Calculating SIP is very easy. You can visit my site http://easysipcalculator.com/ and enter the required details like monthly investment, no of years you are going to invest and what is the expected return rate. Home page - enter the details
Then click on calculate,
You will get the projection of return and detailed summary report. Projected return vs invested capital
=FV((1+20.41/100)^(1/12)-1,36,-5000)produces 239059. All explained in my answer.=FV(20.4/100/12,36,-5000,0,1)producing 249660. The main differences are that the interest rate here is nominal compounded monthly rather than effective annual rate, and the payments are at month-start rather than month-end. Presumably the Mirae calculator uses month-end payments because the lump sum calculates from month-start and they don't want a SIP payment at the same time as the lump sum, but it means the last SIP payment accrues no interest.=FV((1+20.4/100)^(1/12)-1,36,-5000,0,1)producing 242754.