### How do you calculate your fund returns?

As your portfolio comprises of mutual funds, we calculate your portfolio return for you. A simple return calculation will just take the percentage difference between the current value and purchase value.

However, we use a "**Time Weighted Return**" computation called “XIRR” (Internal Rate of Return), which takes into account the duration of your investments. This method more accurately reflects your return when you make multiple investments over a period of time as in a systematic investment plan (SIP).

For example, using a simple method, the return can be calculated below:

- Let's say you invest Rs 20,000 per month for 8 months starting August 2015. The value on April 1, 2016 is Rs 175,000.
- Return (Rs) = Current Value - Amount invested = 1,75,000 - 1,60,000 = Rs 15,000
- Return (%) = Return/ Amount invested x 100 = 15,000/ 1,60,000 x 100 = 9.30% for 8 months OR 9.30 x 12 / 8 =
**14.06% per annum**

You will, however, note that you did not invest Rs 160,000 altogether 8 months ago. You invested some amount it every month. Each of your SIP amounts has been invested for different periods and earned a return for different periods of time.

- August 2015 investment (20,000) for 9 months
- September 2015 Investment (20,000) for 8 months ....
- February 2016 investment (20,000) for 2 months
- March 2016 investment (20,000) for 1 month

So in a way, it is incorrect to consider the amount invested as Rs 1,60,000. Think of your savings bank account - you earn interest on the balance on different days and NOT the balance at the end of the month.

There is a complex way to compute the rate of return called XIRR which considers the actual date on which your money was invested. It's also called the "Personal Rate of Return" because it's unique for each investor reflecting their investment pattern.

For someone investing just once at the beginning of the period, there is no difference in the return calculated by the two different methods. However for customers with SIPs, the simple return calculation tends to understate the return. For example the XIRR return in the above example is **26.8% per annum**.

We use XIRR to provide a better understanding of the investments' performance to investors who invest regularly.