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Mutual Fund Returns

An introduction to Mutual Fund Returns

Over the years, a mutual fund has become the preferred choice among investors to meet their financial goals. To begin with, let us recollect on what exactly is a ‘mutual fund’. A mutual fund is an investment fund which comes into existence by pooling in money collected from many investors, for the sole purpose of investing in securities such as stocks, bonds, money market instruments and other assets. They are governed by a team of professional money managers who diversify/allocate the fund's investments and attempt to produce capital gains or profitable annual returns. These returns which depend upon the performance of the fund are defined as Mutual Fund Returns.

Mutual funds invest in a wide amount of securities ranging from equities to debts, and performance is usually tracked as the change in the total market capitalisation of the fund. Another important factor is that the risk involved is mitigated across the portfolio of investment - which means investors gain important diversification at a very low price. For example, an investor buys a mutual that happens to own shares of multiple companies, when one particular company does not fare well in the market, the investor loses only a fraction of their total investment as the particular company comprises only a small part of the fund’s portfolio.

Types of Mutual Fund Returns

Rolling Returns

They refer to a fund’s annualised return over a particular period of time. They can be daily, weekly or monthly and it measures the fund’s absolute and relative performance over a period of time at regular intervals. Rolling returns take several such blocks of 3 or 5 or 10 year periods at various intervals and see how the fund has performed over that specified time period. Due to different time periods, the return consistency of the fund over the period can be analysed as it takes into consideration different market conditions. Compounded Annual Growth Rate (CAGR) is used to calculate the returns from mutual funds investment which has a holding period that exceeds a year. This reduces the short-term fluctuations and volatility of the Net Asset Value (NAV) of the fund. Under this method, it is assumed that the investment is growing at a steady pace.

Example: If you have a three year holding period, the rolling returns of a mutual fund scheme from 1/1/2009 to 1/1/2018, you start by calculating annualized return from 1/1/2009 to 1/1/2012 (change in NAV between 1/1/2009 to 1/1/2012, annualized). Next, calculate the annualized return from 2/1/2009 to 2/1/2012, then from 3/1/2009 to 3/1/2012, so on so forth.

  • Benefits of Rolling Returns

    • It is an accurate and effective measure to evaluate the performance of mutual funds
    • Reliable way for reaching the investment decision as it is not biased towards any period of time
    • Provides proper insights and hence is good for a recurring (Monthly or Quarterly) or a SIP investor

Trailing Returns

It refers to an annualized return over a particular trailing period till date, that is 1 year, 3 year, etc. (Historical data is used for a block of period). It is a highly relevant way to measure the performance of the mutual fund. With this method, you can evaluate a good 10 year period on a MS Excel sheet by yourself. The formula to calculate trailing return in a Microsoft Excel sheet is (Today’s NAV / NAV at the beginning of the trailing period) ^ (1/Trailing Period) - 1.

Total Return

The actual returns you have accrued from the investment including dividends as well as capital gains is called total return. Example: Let’s say that you purchased 5,000 units of a MF scheme @ NAV (Net Asset Value) of Rs. 20, your total investment stood at Rs.1 lakh when the NAV was Rs.20. After one year the NAV of the MF scheme increased to Rs.22 and the value of your units will be Rs.1.1 lakh (5,000 units x Rs.22 per unit), which means your capital gains shall be Rs.10,000. If the fund declared dividends of Rs. 2 per unit over the course of the year, the overall dividend paid to the investor shall be Rs.10,000 (5,000 units x Rs.2 per unit). Therefore, your overall accrued return shall be Rs.10,000 + Rs.10,000 (dividend + capital gains) = Rs.20,000, which makes your overall return = 20%.

Point to Point Return

An annualised return calculated between two points of time, which is the start date and the closing date of a mutual fund scheme (The return earned from a scheme between the 1st of January and the 31st of December of a particular year). Example: If 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%.

Annualised Return

Annualised Return is calculated on an annual basis but takes into consideration the effect of compounding rate of interest. Example: If an investment of Rs.1 lakh in a MF scheme has grown to Rs.1.4 lakh in 3 years. The absolute return is 40%, but your annualised return is 11.9% because of the compounding effect.

Mutual Fund Return Calculator

The simplest way to calculate the returns for a particular mutual fund scheme is online - a simple google search will grant access to numerous MF return calculators. One simply has to put in the basic details such as the type of MF scheme, time period of investment and amount. Once prompted to calculate, it shows the fund’s annualised and absolute returns from 1 week to 5 years. Many calculators also showcase a fund’s performance with respect to other funds within the same category. Advanced calculators also highlight comparison among different funds which suit a similar SIP or lump sum investor.

Returns for Various Mutual Funds in India

Returns from Moderate Risk Equity Funds

Fund Scheme1 Year3 Year5 Year
Aditya Birla SL Frontline Equity Fund (G)4.77%8.79%16.82%
DSPBR Equity Opportunities Fund – Reg (G) 10.67%4.28%11.50%19.01%
Franklin India Bluechip Fund (G)5.63%7.32%14.57%

Returns from High Risk Equity Funds

Fund Name1 Year3 Year5 Year
Aditya Birla SL Equity Fund (G)4.81%12.76%22.18%
BNP Paribas Mid Cap (G)-4.11%22.29%22.29%
Franklin India Prima Fund (G)4.58%11.73%24.27%

Returns from Moderate-Risk Tax-Saving Funds

Fund Name1 Year3 Year5 Year
Axis LT Equity Fund (G)18.24%12.06%23.78%
Invesco India Tax Plan (G)18.59%12.88%20.86%
Franklin India Taxshield (G)9.90%10.05%18.80%

Returns from High-Risk Tax-Saving Funds

Fund Name1 Year3 Year5 Year
Aditya Birla SL Tax Relief ’96 (G)12.56%12.66%22.52%
Tata India Tax Savings Fund – Reg (G)12.78%15.30%N/A

Returns from Theme Funds

Fund Name1 Year3 Year5 Year
Franklin Build India Fund (G)1.35%1.35%24.80%
Franklin India Technology Fund (G)30.41%10.90%18.99%
ICICI Pru US Bluechip Equity Fund (G)13.74%8.31%14.25%

Returns from Hybrid Equity-Oriented Funds – Moderate Risk

Fund Name1 Year3 Year5 Year
Aditya Birla SL Balanced ’95 Fund (G)3.65%9.24%16.71%
ICICI Pru Equity & Debt Fund (G)9.56%11.72%17.86%
HDFC Balanced Fund (G)10.43%11.63%19.18%

Returns from Hybrid Equity-Oriented Funds – Low Risk

Fund Name1 Year3 Year5 Year
Kotak Equity Savings Fund (G)7.93%7.92%N/A
ICICI Pru Balanced Advantage Fund (G)7.09%7.09%14.39%

Returns from Hybrid Debt-Oriented Funds

Fund Name1 Year3 Year5 Year
ICICI Pru Regular Savings Fund (G)5.11%9.38%11.49%
ICICI Pru MIP 25 (G)7.32%9.30%11.36%
UTI Regular Savings Fund – Reg (G)8.36%8.90%10.90%

Returns from Debt Funds – Six Months to One Year Holding

Fund Name1 Year3 Year5 Year
Tata Treasury Advantage Fund6.66%7.72%8.32%
ICICI Pru Flexible Income Plan (G)6.70%8.02%8.60%
Aditya Birla SL FRF – Long Term Plan (G)6.48%8.02%8.58%

Returns from Short Term Debt Funds – Low Risk

Fund Name1 Year3 Years5 Years
Aditya Birla SL Short Term Fund (G)5.18%7.83%8.47%
UTI Banking & PSU Debt Fund – Reg (G)6.18%8.50%N/A
HDFC Short Term Opportunities Fund (G)6.20%7.77%8.31%

Returns from Short Term Debt Funds – Moderate Risk

Fund Name1 Year3 Years5 Years
Reliance Medium Term (G)6.05%7.64%8.11%

Returns from Long Term Debt Funds – Moderate Risk

Fund Name1 Year3 Year5 Year
Aditya Birla SL Dynamic Bond Fund – Reg (G)0.30%6.51%7.82%
UTI Dynamic Bond Fund – Reg (G)4.10%8.21%9.04%
HDFC Medium Term Opportunities Fund (G)5.92%8.00%8.25%

Returns from Long Term Debt Funds – High Risk

Fund Name1 Year3 Year5 Year
DSPBR Credit Risk Fund – Reg (G)5.67%8.19%8.75%
Aditya Birla SL Medium Term Fund (G)5.23%8.38%9.09%

FAQs On Mutual Fund Reteurns

What is the average rate of return for a mutual fund? The average annualized long term return of S&P 500 over the last 30 years was around 10%.

The average annualized long term return of S&P 500 over the last 30 years was around 10%.

What are the returns on mutual funds?

The money made by the fund as capital over a year is called return on mutual funds.

Is mutual fund return tax free?

Mutual funds attract tax on long term capital gains, you need not pay any tax on long term capital gains made till January 31, 2018. However, you will have to pay tax on long term capital gains of over Rs 1 lakh made after this date.

How much money can you make from a mutual fund?

The amount of money you make on mutual funds depends on the amount invested. The longer the time period, the more the return subject to the performance of the fund.

What are the different types of returns in mutual funds?

A few to name are annualised, absolute, point-to-point, rolling, trailing and total return.

What are the average return on mutual funds for the past 10 years?

Mutual fund schemes offer 15% returns over the past 10 years on an average.