Use this tool to calculate the annualized return (XIRR) of your mutual fund SIPs month by month since the date you started it and compare its performance with its benchmark. In this update to the Mutual Fund SIP XIRR Tracker, I have integrated it with Pranav Date’s Nifty Historical Data (Price, Total Returns, PE, PB and Div Yield) Downloader.
This now offers a range of about 70+ benchmarks from the BSE and NSE to compare mutual fund performance.
What is XIRR?
When you invest a lump sum in a volatile instrument (equity, debt fund, gold fund etc.), the average rate at which the investment has compounded is given by the CAGR
When you invest periodically in the same instrument, instead of CAGR, a quantity called the XIRR, is calculated. This can be interpreted as the average CAGR of all the instalments.
If you track this XIRR month after month for a SIP instrument and compare it with the corresponding number for a benchmark, it gives you an idea of how consistently the fund has beat the benchmark.
Here are few screenshots.
The inputs screen of the freefincal XIRR Tracker
Quantum Long Term Equity vs Nifty 50 (total returns index)
Each dot in the top graph is the XIRR of a SIP started on Apr 3rd 2008 (this can be changed by the user). Notice the outperformance of the fund. The green line (both top and bottom) is just the number of SIP instalments added up. So it increases like a straight line.
In the bottom graph, the red dots represent the percentage outperformance:
number of months fund return was higher than benchmark/ (total number of months) expressed as a percentage. A steady fall over many months in this can be used as a sign to switch funds.
HDFC Equity vs NIfty 500 (total returns index)
How to use this sheet
1: As a way to observe and get used to fund volatility. Notice the high returns at the start gradually dropping down. This gives us a sense of proportion.
2: To evaluate fund performance with respect to its benchmark from the date in which you started investing (not just SIPs)
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