Will : legal declaration of how a person wish his/her possession to be disposed after their death
Fund : An amount of money saved or collected for a particular purpose
Return : Profit or loss derived from an investment
Investor : An investor is any party that makes an investment.
Association of mutual funds in India is an apex body for all the Asset Management companies registered with SEBI. AMFI has created a set of Ethics & Guidelines to be followed by the companies & distributors thereby protecting & promoting the interest of Mutual funds as well as investors.
The gain or loss in an investment over a specified time, with respect to the amount of initial investment. It is generally given in percentage.
Compounded Annual Growth Rate is the year over year growth on an investment at the given point of time.
In Mutual Fund, Net Asset Value is the price per unit of the fund. This is similar to Price of a share.
Have you invested in Mutual Funds? What has been your ROI (Return on Investment)? How do you calculate mutualfundreturns?
Give us a few minutes of your precious time and read this piece; You will learn, how to calculate mutualfundreturnswith worked out examples and formula for calculating different types of mutualfundreturns.
You will also get to know how to calculate profit percentage in mutualfundfor investments done for different periods.
In simple terms, return is the yield that your investment generates over a period of time. It is the percentage increase or decrease in the value of the investment in that period. The return on a mutualfundfor a particular predetermined period is calculated using the below formula:
According to SEBI, the performance of a particular scheme of a mutualfundis denoted by Net Asset Value (NAV).NAVis the market value of the securities held by the scheme. Since the market value of securities changes every day,NAVof a scheme also varies on day to day basis.
TheNAVper unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.
PurchaseNAVand saleNAVare two important numbers for mutualfundprofit calculation.
If the market value of securities of a mutualfundscheme is Rs 300 lakhs and the mutualfundhas issued 20 lakh units of Rs. 10 each to theinvestors, then theNAVper unit of thefundis Rs.15.
Example: MutualFundReturn on Investment Calculation
If the currentNAVis 15 and the previousNAVwas 13.5,
the return would be (15 13.5) x 100/13.5 = 150/13.5 = 11.11% over the time period.
If the time period is in months say 3 months or in years say 2, or in days say 100, in that case, the above formula can be used as
x 100 x 12/(No. of months) or 1/(No. of years) or 365/(No. of days)
The above example will producereturnsof 11.11 x 4 = 44.44% (for 3 months); or 5.55% for 2 years or 40.55% for a period of 100 days.
After knowing the averagereturnsof a mutualfund, you may still want to know the absolutereturnsof thefundbecause it gives you clearer indication of thereturnsgenerated. Absolute Returns refers to thereturnsthat afundachieves over a period of time.
It measures the percentage appreciation or depreciation in the value of theNAVover a certain time frame.
The Formula for calculation of the absolutereturnsof a MutualFund:
(CurrentNAV PurchaseNAVor HistoricalNAV) x 100/(PurchaseNAVor HistoricalNAV)
Example for calculation of the absolutereturnsof a MutualFund:
If you have purchased it at Rs.11 per unit and after 3 years, ifNAVappreciates to Rs. 15 per unit, here the absolute return is 36.36% as calculated below:
You may useCAGRto calculatereturnsfor the period beyond one year for your investment in MF. TheCAGRreturnsare annualizedreturns, with the compounding effect. Let us see how to calculate annualised return in mutualfund.
CurrentNAV/ PurchaseNAV ^ (1/no. of years) or (365/ no. of days) 1
The purchaseNAVof your MF is Rs.15 per unit. After two yearsNAVrises to Rs.25.
ThenCAGR/ annualizedreturnswill be 29.09% i.e. [(25/15)^(1/2) -1].
TheCAGR/ annualized return calculates the growth rate of investment every year with the compounding effect. In the above example, in case your investment was Rs1500 which has appreciated by 29.09% each year to become Rs.2500 at the end of two years.
When you are calculatingreturnsfor less than a year, you can calculate absolute return. For calculating mutualfundreturnsfor an investment period of more than a year then you can use annualisedreturns.
When you need to calculate point to pointreturns, you can use absolute return. When you want to calculate the average yearly return, then you can use annualised return.
Suppose you have invested Rs. 2000 every month for the last 1 year and value of your investment rose to Rs. 26000 due to appreciation inNAV. The following table illustrates your SIP investment:
As the investor invests Rs.2000 per month for 1 year, the absolutereturnsformula will not work as the money is invested for different periods of time.
TheIRR (InternalRate of return)considers the time value of money for investment made at different point of time. Therefore, we may use XIRRreturns(which is nothing but IRR) in MS Excel to find out the return on SIP in the above example, which is 15.65%
You now know very simple ways to calculatereturnson MutualFundinvestments. To know the NAVs of MF schemes, you may have to go to the website ofAMFI(The Association of Mutual Funds in India) at.
Have you tried any other way to calculate mutualfundreturns? What result did you get? How much time did it consume? Kindly share your views in the comment box.
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