Want to Calculate Returns on Your Mutual Fund Investment? Read this & Compute
Last Updated : Oct. 17, 2016, 11:59 a.m.
Mutual fund investors, like other investors, expect returns from the investment they pump into various equity, debt, hybrid and other schemes. When it comes to mutual fund, returns are based on net asset value (NAV) that changes on a daily basis as the market value of the underlying securities changes everyday. The NAV per unit is calculated in a simple manner. First, the liabilities are subtracted from the assets. The sum so obtained will get divided by the number of units of the scheme on a particular date to arrive at NAV. Assets here means the market value of MF investment in stocks, bonds, cash, as well as interest and dividend accrued on the securities. On the other hand, liabilities include outstanding expenses and debts. You can calculate the returns on your mutual fund investment by following a host of formulas explained below.
Return on MF Scheme
Return= Existing NAV-Previous or historical NAV x 100
Previous or historical NAV
So, if the existing NAV is Rs 18 and the previous NAV was Rs 15, then the return would come out to be 20% as per the formulae mentioned above.
The formula will further expand in terms of time period in days, months or years.
The revised formula would be Existing NAV-Previous or historical NAV x 100 x 365/no of days
Previous or historical NAV
Existing NAV-Previous or historical NAV x 100 x 12/no of months
Previous or historical NAV
Existing NAV-Previous or historical NAV x 100 x 1/no of years
Previous or historical NAV
Let the time period of investment be 200 in days or 4 in months or 3 in year. Then how would return sum up in different time periods?
Based on the above formula, the return would be 36.5% in days, 60% in months and 6.67% in years.
How to Calculate Absolute Returns?
Absolute returns would provide a clear picture on the returns yielded through the investment. The formula for absolute returns is shown below for you to see.
Absolute Returns= Existing NAV- Purchase or Historical NAV x 100
Purchase or Historical NAV
For instance- If you have bought units of a mutual fund scheme at a NAV of Rs 13 per unit, and the NAV rises to Rs 18 per unit after a period of say 4 years, then the absolute return would be 38.46% as calculated from the formula stated above.
Compounded Annual Growth Rate
If your mutual fund investment is held for more than a year, you can use the mechanism of compounded annual growth rate (CAGR) that demonstrates the importance of compounding with respect to the invested capital.
Formula for CAGR in mutual fund investment= (Current NAV/Purchase NAV)/(1/no of years) or (365/no of days)-1
For instance- The purchase NAV of your MF scheme was Rs 12 per unit and the same rose to Rs 20 after 2 years, then returns as per CAGR will be 29.09%.
These were the calculation methodologies of mutual fund returns. Keep refering to these and compute the returns on your mutual fund investment.