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If you invest Rs 12,000 on 1st of Jan and it reaches to Rs 13,200 in 12 month, i.e on 31st Dec of the same year, if Rs 12,000 grows to Rs 13,200, we say gain is 1,200 and gain percentage is 10% annual.
However, if you invest Rs 1,000 every month, say on 1st of every month (i.e SIP); i.e you invested Rs 12,000 in 12 months and it grows to value Rs 13,200 on Dec 31st of the same year, what will be annualized % returns?
You can use excel formula XIRR to calculate returns of SIP.
You need to write the date in one column and investment value in another column. Here is how it is done:
The Formula to calculate annualized Return in Cell C17 is as follows:
As you can see, the last value has to be entered as negative amount as it signifies that money is withdrawn on particular day to calculate returns. Here positive amount means investment while negative amount means amount withdrawn (or value on date).
So, answer to the question. If you invest Rs 1000 on 1st of every month for 12 months, and the total invested amount grows to Rs 13200 (i.e growth of Rs 12,00), then overall annualized return would be 19%.
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