Mutual funds are a popular investment option in India, with many investors considering them as a safe and profitable way to grow their wealth. One of the key factors that investors consider when choosing a mutual fund is its returns. In this blog, we will explore mutual funds returns in India and what you need to know about them.
What are mutual fund returns?
The return on a mutual fund is the gain or loss on your investment over a certain period of time. It is the difference between the purchase price and the selling price of the units of the fund. Mutual funds are designed to provide returns to investors by investing in various asset classes such as equity, debt, and hybrid instruments.
How are mutual fund returns calculated?
Mutual fund returns are calculated using the formula: (Current NAV – Previous NAV) / Previous NAV * 100. NAV stands for Net Asset Value, which is the value of the assets held by the mutual fund divided by the number of units outstanding. NAV is calculated daily and reflects the current market value of the mutual fund’s investments.
What are the types of mutual fund returns?
There are two types of mutual fund returns: absolute return and annualized return.
Absolute return is the actual return earned on your investment over a certain period of time. For example, if you invested Rs. 10,000 in a mutual fund and it grew to Rs. 11,000 over one year, your absolute return would be Rs. 1,000.
Annualized return is the average return earned on your investment per year. It is calculated by taking the absolute return and dividing it by the number of years invested. For example, if your absolute return was Rs. 1,000 over two years, your annualized return would be Rs. 500 per year.
What are the factors that affect mutual fund returns?
There are several factors that can affect mutual fund returns, including market conditions, economic factors, and the performance of the underlying securities in the fund’s portfolio. It’s important to remember that mutual fund returns are subject to market risks and may vary over time.
How to choose the right mutual fund for good returns?
Choosing the right mutual fund can be a daunting task, but there are a few key factors to consider that can help you make an informed decision:
- Investment objective: Identify your investment objective, whether it is capital appreciation, regular income, or both.
- Risk tolerance: Understand your risk appetite and choose a mutual fund that aligns with it.
- Fund performance: Check the past performance of the fund over different time periods and compare it with its benchmark and peers.
- Fund manager: Look for an experienced fund manager who has a proven track record of delivering consistent returns.
- Expense ratio: Consider the expense ratio of the fund as it can impact your overall returns.
In conclusion
mutual funds are a popular investment option in India, and mutual fund returns are a key factor that investors consider when choosing a fund. It’s important to understand the types of returns, how they are calculated, and the factors that can affect them. By considering the above factors, you can choose the right mutual fund for good returns that align with your investment objectives and risk profile.
Read more useful content:
- How to invest in mutual funds
- All about mutual funds-types & importance
- The Power of SIP Investment in Mutual Funds
Frequently Asked Questions (FAQs)
What are mutual fund returns?
Mutual fund returns refer to the gain or loss on your investment in a mutual fund over a certain period of time. It is calculated by taking the difference between the purchase price and the selling price of the units of the fund.
How are mutual fund returns calculated?
Mutual fund returns are calculated using the formula: (Current NAV – Previous NAV) / Previous NAV * 100. NAV stands for Net Asset Value, which is the value of the assets held by the mutual fund divided by the number of units outstanding.
What are the types of mutual fund returns?
There are two types of mutual fund returns: absolute return and annualized return. Absolute return is the actual return earned on your investment over a certain period of time, while annualized return is the average return earned on your investment per year.
What factors affect mutual fund returns?
Several factors can affect mutual fund returns, including market conditions, economic factors, and the performance of the underlying securities in the fund’s portfolio.
Are mutual fund returns guaranteed?
No, mutual fund returns are not guaranteed. They are subject to market risks and may vary over time. Past performance is not an indicator of future performance.
How can I choose a mutual fund with good returns?
To choose a mutual fund with good returns, consider factors such as your investment objective, risk tolerance, fund performance, fund manager’s experience, and expense ratio.
Can mutual fund returns be negative?
Yes, mutual fund returns can be negative if the value of the underlying securities in the fund’s portfolio decreases.
How often are mutual fund returns calculated?
Mutual fund returns are calculated daily based on the Net Asset Value (NAV) of the fund.
Can I expect higher returns from equity mutual funds compared to debt mutual funds?
Equity mutual funds typically have a higher potential for returns compared to debt mutual funds as they invest in stocks of companies, which have the potential to grow in value over time. However, they also carry a higher risk.
Should I invest in mutual funds based solely on past performance?
No, past performance is not a guarantee of future performance. It’s important to consider other factors such as the fund’s investment objective, risk profile, and expense ratio before investing in mutual funds.
