Mutual Fund Returns in India

List Returns from High Risk Equity Funds

List of Returns from Best ELSS Mutual Funds

Returns from Hybrid Funds

Types of Mutual Fund Returns

Absolute Returns

• Absolute returns are quick and easy because they show how much your investment went up or down as a percentage. They do not show how long you have held the investment for. Absolute returns are best used for calculating short-term returns (usually less than a year) and are easy to determine.

• For example, if you invested Rs.10,000 in a fund six months ago, and when you looked at it today it was worth Rs.11,000, then your absolute return would be 10% (the value of your investment increased by 10%). Absolute returns are very helpful in determining how much your investment has increased over a specific timeframe, but do not take into account how long you have invested, nor do they factor in compounding, and thus cannot be used to make comparisons between long-term funds.

Annualised Return

• Annualised return, often referred to as the compounded annual growth rate (CAGR), provides a yearly average for your investment growth, factoring in compounding effects on your overall investment.

• Compounding means that not only are you earning interest but also the interest starts earning interest over time/rise to the next level on the interest you earned the first year over the next year. So, if you invested 10,000 3 years ago, and it continues to grow year after year, you would see an annualised (CAGR) return each year, no matter if the investment went up and down.

Trailing Return

• Trailing returns evaluate the performance of an investment fund during a time frame that is inclusive of today (1-year, 3-years, 5-years, 10-years) and are reported in annualized form as an average of total annual growth for the identified time frame. The trailing returns provide investors an opportunity to understand the fund’s recent performances and compare them to other funds during the same period.

• For instance, if a fund has a trailing-three-year return of 12%, it indicates that, on average, over the last 3 years, that fund returned 12% per year. Thus, trailing returns are valuable for comparing fund performances and investors should keep in mind that trailing returns are based on historical performance and aren't guaranteed to be indicative of future performance.

Point to Point Return

• The performance of a mutual fund is defined by how much it has appreciated between two date selections. Customers frequently use the point-to-point return when they want to look up the historical performance of their mutual fund within a specific timeframe, such as 2021 to 2025, or the entire period of their initial investment until the present day.

• For example, an investor who put in Rs.80,000 in January, 2021, then received Rs.90,000 in December, 2025 would have experienced a point-to-point return yielding an annualized growth rate of such a vehicle. The available point-to-point returns provides a very accurate assessment of how that mutual fund performed over that exact period but is entirely dependent on the specific days selected, therefore, different date selections may provide investors with different growth rates.

Annual Return

As the term suggests, annual return essentially refers to the return earned from a scheme between the 1st of January and the 31st of December of a particular year. For instance, in case a scheme's NAV on the 1st of January is Rs.100 and on the 31st of December is Rs.110, your annual return shall be 10%.

Extended internal rate of return (XIRR)

• The extended internal rate of return (XIRR) is a method for calculating your return on investments when making investments at different times, such as through a monthly Systematic Investment Plan (SIP). With XIRR, both the timing and the dollar amount of each investment are considered. It gives you a far more accurate representation of your true return, than just looking at the increase in the fund's Net Asset Value (NAV).

• When calculating an XIRR, for example, if you had invested Rs. 5000 per month, for one year, and after one year you redeemed your investment, the XIRR would give you the total annual compounded rate of growth on the amount invested considering the date of each payment. Therefore, XIRR is a very effective method of measuring the accumulated growth of a Series of Systematic Investment Plans.

Rolling Returns

• Rolling returns represent the performance of a mutual fund using multiple overlapping intervals (daily, weekly and monthly), but they do this across an infinite number of possible start and end dates. Instead of determining a fund's return from one predetermined start and end date, the rolling return calculation allows investors to observe how often a fund produces a consistent return in a variety of market situations.

• As indicated above, using five years' worth of data, rolling returns enables an investor to view the historical performance of a given fund under every one-year time frame. Overall, rolling returns are viewed as one of the most effective means of gauging fund performance due to their better depiction of an investment's reliability and consistency, as well as their volatility.

Compound Annual Growth Rate

• It is used to calculate the returns from mutual funds investment which has a holding period that exceeds a year.
• This would reduce the short-term fluctuations and volatility of the Net Asset Value of the funds. Under this method of calculating returns from mutual funds, it is assumed that the investment is growing at a steady pace

In order to calculate the Compound Annual Growth Rate (CAGR) manually, the equation is as follows:

CAGR = [(Current Net Asset Value / Beginning Net Asset Value) ^ (1/number of years)]-1

How to Calculate your Mutual Fund Returns Online?

You can use the mutual fund returns calculator online to understand how much returns will be yielded from the capital invested.

• All you have to do is enter basic details such as name of the mutual fund, scheme/ plan, the "from" and "to" date for returns and then click on "Calculate".
• The results page would project the annualized returns and absolute returns availed during a period from 1 week to a maximum period of 5 years.
• Most mutual fund returns calculator also projects the performance rank of the scheme, within fund classes.

Things to Consider About Mutual Funds Returns

Investment Goals

• The most important factor to consider when determining whether a given fund is the right choice for you is to understand how well it will meet your own personal financial goals, as well as your Risk Tolerance.

• Some funds are more heavily weighted towards long-term growth, while others have a greater emphasis on producing Steady Income or following a more balanced investment approach.

• Choosing a fund that aligns with your investment objectives ultimately ensures that the money you invest will contribute to achieving the overall financial goals you've established, without causing you to experience unnecessary levels of Stress or Risk.

Risk-Adjusted Rate of Return

• Understanding the relationship between risk and return is critical in your investment decision-making process. While many Funds have the potential to produce very high returns, the increased volatility associated with many of these same funds may create a level of risk that is not appropriate for you or your particular financial goals.

• When evaluating the relative potential rate of Return, a fund that has generated as compared to the amount of risk it assumes will allow you to obtain a clearer understanding of how to effectively compare funds within multiple risk profiles.

Consistency of Performance

• Generally, the performance of a fund that provides reasonably consistent levels of investment performance over multiple Invested Periods will outweigh that of a Fund that experiences unsteady / erratic Performance.

• A Fund that demonstrates Consistent Return suggests an Investment Strategy that is Soundly Managed and therefore Very Resilient to changing Market Conditions, which reduces the level of uncertainty associated with a Long-Term Investment Strategy.

• Moment in Time: Duration matters when assessing returns when investing. Short-term returns can vary dramatically, but long-term will give a more accurate and dependable understanding of how well the fund is functioning overall. Examining returns over many timeframes allows one to see how a fund is performing in the short term as well as how it has performed over time.

Benchmark Comparison

• Utilizing an appropriate benchmark index to compare a fund’s returns shows if the fund is truly outpacing other similar investments.

• If a fund has consistently lost compared to its benchmark, there may be management and/or strategic inefficiencies causing it to underperform.

• If, conversely, they are consistently gaining value when compared to their benchmark, they may be performing very well as a fund.

Total Returns to an Investor

• Dividend payments and other payouts represent part of an investor’s total returns from a fund.

• The fund may have shown the same growth in value as another.

• If a dividend was also paid by the fund during the same period, the potential total returns from the fund would be significantly greater, meaning it would represent a more attractive investment than the other fund.

Historical Trends

• The historical performance of a fund provides insight into how the fund performed during multiple market cycles.

• Historical performance is not an indicator of future performance, but understanding trends will help you anticipate risk and set realistic expectations for your investment.

Expense Ratio

• Fees, while relatively small in comparison to the total amount you have invested in a mutual fund, have a large impact on your total return, particularly over a longer time.

• Evaluating the expense ratio of mutual funds helps identify those funds that are likely to provide you with a higher net investment growth rate once you pay them.

GST rate of 18% applicable for all financial services effective July 1, 2017.

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