Different Types of Returns in Mutual Funds

What are Mutual Fund Returns?

Types of Mutual Fund Returns in India

Let us take the example of Mr Ravi, who invested ₹ 1.5 lakhs in a mutual fund scheme. The present value of the invested amount is ₹ 2.5 lakhs. You can calculate the absolute return for Mr Ravi using the following formula:

Particulars Amount
Final Investment Value ₹2,50,000
Initial Investment Value ₹1,50,000
Absolute Return 66.66%

Let us understand this with the help of an example.

Mr Ram invested ₹10,000 in a mutual fund scheme, and the final value is ₹14,000 over 2 years.

Particular Amount
Final Value ₹14,000
Initial Value ₹10,000
Number of years 2
CAGR 18.32%

Benefits of Each Type of Return in Mutual Funds

The table below shows the key benefits of different mutual fund returns in India.

Type of Mutual Fund Returns Benefits
Absolute Returns Diversification of relative return funds portfolio. Lower risks because of the diversified structure. Generates positive returns. Adjustable with the movements of the equity market. Independent of market indexes or benchmarks.
Annualised Returns Gives a preview of the performance of an investment. Due to compounding, it provides a clearer idea about the worth of investment.
Compound Annual Growth Rate Compares a variety of investments over a similar investment perspective. Remains unchanged with the percentage changes in the investment horizon. Fixes the limitations of arithmetic average returns.
Trailing Returns Provides a clearer picture of the mutual fund scheme's performance than absolute returns. Historical data is taken into consideration for a block period.

 

An investor needs to know his/her investment objective and individual goal before investing money in any mutual fund. Knowledge about the expected returns helps investors get an idea about the scheme's performance over certain time periods.

FAQs about Types of Mutual Fund Returns

When are absolute returns calculated?

up-arrow
Absolute returns are calculated while looking to compute the returns for a tenure of less than 1 year.

When are annualised returns useful?

up-arrow
Annualised returns are useful when we need to compare different mutual fund performances across different tenures.

What are the types of returns in mutual funds?

up-arrow

The following are the types of returns in mutual funds:

  • Absolute Returns
  • Annualised Returns
  • Trailing Returns
  • Compounded Annual Growth Rate

Latest News

Currently there are no news to show.

Read More

Renew & Download Policy Document, Check Challan, Credit Score, PUC & more

Anytime, Anywhere. Only on Digit App!

google-play-icon

Rated App

app-store-icon

Rated App