Mutual Fund Returns

Mutual Fund

By Scripbox April 26, 2021

MF Terms

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.

CAGR

Compounded Annual Growth Rate is a number that explains the growth of a particular investment over a specific time period.

Exit Load

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.

Calculating Returns

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.

Annual Return

This is the return calculated over a period of 1 year and expressed as a time-weighted annual percentage.

Absolute Return

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.

Annualised Return

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.

XIRR

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.

Invest Wisely

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.