Mutual Fund Returns
By Scripbox April 26, 2021
Investment in MF can be a lump sum (one-time), or an SIP where a certain amount is deposited at regular intervals. NAV (net asset value) is the price at which an investor buys 1 MF unit.
Compounded Annual Growth Rate is a number that explains the growth of a particular investment over a specific time period.
If an MF is giving poor returns, you may decide to “exit” it. Some MFs require that you pay a fee to do so, and this is known as exit load.
Most MFs are aimed at long-term investors and seek relatively smooth and fairly consistent growth. Economic conditions & market performance help determine a good return.
This is the return calculated over a period of 1 year and expressed as a time-weighted annual percentage.
The formula is useful for calculating returns when the holding period is less than 12 months. It is seen as current NAV - beginning NAV x 100.
Used to evaluate an MFs performance over time. Unlike annual return, it is based on the full investment holding period, regardless of whether it is shorter or longer than a year.
Extended Internal Rate of Return calculates the ‘internal’ return rate or annualised yield for a schedule of cash flows that occur at irregular intervals - aggregation of multiple CAGRs for a SIP
Average Rate Of Return
Different types of mutual funds have different returns. Historically, equity MFs bring in 10-12%, while debt delivers 6-7%. But these depend on market volatility.
Mutual funds can be a wise investment with good returns if monitored, done systematically and with an eye on the future.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.