How to calculate your mutual fund profit..!?

Generally before investing in any mutual fund, it is very important to know the past performance of that fund. CAGR calculates the annual growth rate of an investment over a specified period. This calculator is a common tool to calculate the return given by a particular mutual fund scheme. It shows the average annual return provided by the fund over some time, assuming that the return will increase every year. For example, if you invest in a mutual fund for 5 years, CAGR indicates the average annual return of the fund over the past years. With the help of CAGR, the overall annual growth or decline of mutual funds can be known. This account is very useful for long-term investments. Mostly used for large-scale investments. Suppose an investor invests Rs 1.20 lakh in a mutual fund scheme. After five years the investment will grow to 1.80 lakhs. The CAGR will be 8.45%, which means that a total investment of Rs 1.20 lakh should grow at the rate of 8.45% every year for five years and eventually grow to Rs 1.80 lakh. This measure calculates annual returns for investments with cash flows at irregular intervals. It is a single rate of return that gives the present value of an investment when applied to each installment or redemption.  Calculating XIRR is the best way if you invest in SIP mode. This method is useful for different purchase prices and installment periods. This method takes into account the timing of cash flows.

  Here's how it calculates XIRR for your SIP portfolio/ investments:

Step 1: Enter your investment date in the first column
Step 2: Enter all your investment transactions in the next column. Each transaction is marked with a minus sign (-), meaning all outflows such as investments and purchases are marked negative. All credits such as withdrawals and withdrawals will be marked positively.
Step 3: In this step specify the present value of your investment and the withdrawal date.
 Step 4: Use the XIRR formula in Excel in this step. XIRR = (Investment Amount, Date) This metric is used to estimate investment profitability. This method works as a special discount rate considering the changing value of money over time. In this method, the cash flows are discounted at a certain rate when the cash flows are known to be worth the current investment. An investor can use IRR to calculate returns on their SIP, SWP, and lump sum investments.
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Sowmiya Sriram

08/04/2024 12:15 PM