Mutual Funds are a financial vehicle that includesa pool of money collected from investors. The fund managers then invest that money in a horde of securities like Stocks, Bonds, and other assets. Their aim while choosing the asset is to make sure they produce the highest possible returns for the investors. But how to calculate Mutual Fund returns if you are the investor and not a fund manager? Should you take help from a Mutual Fund calculator or do it independently?
While taking the help of theMutual Fund Return calculatoris a brilliant idea, you can also carry out the calculation yourself. Let us discuss some ways to do that. We will also discuss how to calculate the three most important types of returns:
- Absolute return
- Annualised return
- Compounded Annual Growth Rate (CAGR)
Absolute return
These are the increase (or decreases) in your investment percentage-wise. This is usually used for Mutual Funds whose tenure is less than a year. The formula for calculating absolute return is:
Absolute return = (present NAV – initial NAV)÷ initial NAV × 100
The NAV orNet Asset Value of Mutual Funds is its unit price. The NAV gets decided at the end of the trading day by combining the prices of all the securities that the Mutual Fund invests into.
Annualised return
If the Mutual Fund’s tenure is over a year, calculate the annualised return and not the absolute one. It also measures how much your investment has grown in a year. The formula for calculating annualised return is:
Annualised return = [(1+absolute rate of return) ×(365÷number of days)] – 1
The totalreturn rate for Mutual Funds is the return it offers without comparing it to any benchmark index.
Compounded Annual Growth Rate
What if you want to calculate a return for more than a year and Lumpsum Investment? This is where CAGR calculation helps. Your investment might give different returns at different times. But CAGR however, offers the average annual growth rate. Here is how to calculate CAGR:
CAGR = [{(present NAV÷initial NAV)×(1÷number of years)}-1]×100
How does the calculator work?
Use theMutual Fund SIP calculator to compute returns based on the expected rate of return. The calculator offers the final maturity amount paid to you. You only need to add your investment amount and the predicted rate of return. Alternatively, you can also put in the amount you are expecting on maturity to predict the rate of return.
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