How to Calculate Mutual Fund Returns

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Are you one of those avid mutual fund investors who miss none of your investment follow-ups?

Then, how certain are you about what has been ROI (Returnate on Investment)?

Do you at times still, feel lost and confused about calculating your mutual fund investment returns, beforehand?

This is an alarming concern since being aware of the returns you may earn in the future can help you plan your financial decisions in a much smoother way. 

But you worry not! 

Because not being able to calculate the accurate returns on your mutual fund investment is no individual’s fault. 

It’s the challenging calculation behind ascertaining your mutual fund returns that builds a wall between you and your returns. 

So, that brings us to the most important question:  

How  to  calculate mutual fund returns?

Give us a few minutes of your precious time and read this piece; You will learn, how to calculate mutual fund returns with worked-out examples and a formula for calculating different types of mutual fund returns.
You will also get to know how to calculate the profit percentage in the mutual fund for investments done for different periods.

Table of Contents:

• Mutual Fund Related Terms You Need to Get Familiarised With
• What is the ‘return’ on a Mutual fund Scheme?
• So what’s NAV and formula to calculate the NAV?
• How to Calculate Mutual Fund Returns?
• What is a Mutual Fund Calculator?
• Advantages of using a mutual fund calculator
• Finally

Mutual fund related terms you need to get familiarised with:

Before getting started with calculating returns of mutual fund investments, let me explain a few terminologies that might help you understand the concept of mutual funds better.

• Mutual fund lump sum investment
• Systematic Investment Plan(SIP)
• Exit load

i. Mutual fund lump sum investment:

A lump sum investment refers to a ‘one-time’ investment. 

It is usually made when the investor has a substantial disposable amount of money in hand.

ii. Systematic Investment Plan(SIP):

Investing/depositing a certain amount in a mutual fund scheme at periodic intervals by an investor is called Systematic Investment Plan (SIP).

iii. Exit load:

A fee amount paid to ‘exit’ a mutual fund may be termed as ‘Exit load’. Only some Mutual Funds require that you pay a fee to do so. And the amount varies from one fund to another and is usually some percentage of your  redemption value.

What is the ‘return’ on a mutual fund scheme?

In simple terms, ‘return’ is the yield that your investment generates throughout a period. It is the percentage increase or decrease in the value of the investment in that period.

The simple ways to calculate the returns are given below:

• • Absolute Returns
    
  • Simple Annualized Returns
  • CAGR (Compounded Annual Growth Rate)
  • XIRR (for calculating SIP Retrns)
  • Mutual Fund SIP calculator to Build a corpus

We will discuss them in detail. But first, let’s understand, what is the significance of  (NAV) in Mutual Fund calculations.

So what’s NAV and formula to calculate the NAV?

Example: How to calculate NAV of mutual fund

If the market value of securities of a mutual fund scheme is Rs 300 lakhs and the mutual fund has issued 20 lakh units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.15.

i.e. 300 Lakhs / 20 Lakhs = 15

To know more about NAV, you can read this detailed post on Net Asset Value (NAV).

How to Calculate Mutual Fund returns?

There are many ways to calculate mutual funds returns.

Either you have invested in a lump sum or a SIP investment, these methods can be applied to both of them.  

So,the method of mutual funds returns calculationwhich you need to use depends on what you are trying to calculate and why.

1. Absolute Returns

This method is common when the holding period of your investment is less than 12 months. It helps you calculate the simple returns on your initial investment.

Absolute Returns refers to the returns that a fund achieves throughout a period.
It measures the percentage appreciation or depreciation in the value of the NAV over a certain time frame.

To calculate absolute returns, all you need is the current NAV and the initial NAV of your investment.
Simply put,

the absolute returns formula is:

Example: Mutual Fund Return on Investment Calculation

If the current NAV is 15 and the previous NAV was 13.5,

the return would be (15 – 13.5) x 100/13.5 = 150/13.5 = 11.11% over the  period.

If the 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
The above example will produce returns of 11.11 x 4 = 44.44% (for 3 months); or 5.55% for 2 years or 40.55% for a period of 100 days.

Example 2: Calculation of the absolute returns of a Mutual Fund:

If you have purchased it at Rs.11 per unit and after 3 years, if NAV appreciates to Rs. 15 per unit, here the absolute return is 36.36% as calculated below:

(15 – 11) x 100 / 11 = 36.36%

2. Simple Annualized Returns

This method is used when the investment duration is exactly 1 year.

The formula to find out the simple annualized returns is given as:
You may put this in the excel sheet to calculate it.

For example, the NAV of Rs. 20 may shoot to Rs. 25 in the next 8 months, that is, 240 days. The absolute returns can be calculated as (25-20)/20 = 0.25.

To find the simple annualized returns, we use the formula described above,

(1 + 0.25)^(365/240) – 1 = 40.4%

3. CAGR (Compounded Annual Growth Rate)

When the investment duration is more than 1 year, CAGR is a better way to depict returns. The value of CAGR indicates that how the investment would have grown had it generated a steady return.

The CAGR returns are annualized returns, with the compounding effect.

The formula used to find CAGR is given below,

Example: CAGR Calculation

The purchase NAV of your MF is Rs.15 per unit. After two years NAV rises to Rs.25.

Then CAGR will be 29.09%

i.e. [(25/15)^(1/2) -1].

The CAGR 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.

Absolute Returns Vs Annualized Returns

When you are calculating returns for less than a year, you can calculate absolute return. For calculating mutual fund returns for an investment period of more than a year then you can use  returns.

When you need to calculate point to point returns, you can use absolute return. When you want to calculate the average yearly return, then you can use  return.

4. XIRR (for calculating SIP Returns)

XIRR is a function in Excel for calculating the Internal Rate of Returns for an array of cash flows occurring at an irregular interval. To calculate XIRR, you need the data given below

• • • SIP Amount
    • Dates of SIP investments
    • Date of redemption; and
    • Maturity (Redemption) Amount

Let’s take an example:

Suppose you have invested Rs. 2000 every month for the last 1 year and the value of your investment rose to Rs. 26000 due to appreciation in NAV. The following table illustrates your SIP investment:

Returns on SIP (Systematic Investment Plans)

As the investor invests Rs.2000 per month for 1 year, the absolute returns formula will not work as the money is invested for different periods of time.

The IRR (Internal Rate of return) considers the time value of money for the investment made at different points of time. 

Therefore, we may use XIRR returns (which is nothing but IRR) in MS Excel to find out the return on SIP in the above example, which is 15.65%

5. Mutual Fund SIP calculator to build a corpus

The above 4 methods explain the most effective formulae which helps you in calculating the mutual fund returns you have earned.

The below-automated calculator will help you project and find how much will be the future value of your SIP investments.

This calculator also can be used to find out how much you need to save to accumulate a particular corpus.

What is a Mutual Fund Calculator?

Now, who wouldn’t say yes to an online tool which can help investors calculate their returns rather than manually pulling out the whole math?

This is called the Mutual Fund calculator and this calculator uses a certain investment strategy. 

A mutual fund return calculator can help an investor to understand how far they have reached with their scheduled goal. 

They also provide data on how far you can achieve your goals based on the planned investment and rate of return.

How can you make utmost use Advantages of using a mutual fund calculator?

There are several ways to have benefits through  using a Holistic mutual fund returns calculator, which in turn could make the life of an investor much easier. 

They include: 

• • • Accurate valuation
    • Effortless and time-saving process 
    • Easy access 

Accurate valuation

If it’s a never-ending process for you to calculate the returns on your mutual fund investment, then using an online Mutual Fund returns calculator is just for you. 

A Mutual Fund Calculator can provide you with an accurate valuation of the returns on your mutual fund investments.

Effortless and time-saving process

A Mutual Fund calculator could save your valuable time and effort by simply eliminating the need to do lengthy manual calculations.

Easy access

Are you are home away for a while now and can’t stop worrying about the returns you would earn in the coming future, then an Online Mutual Fund Calculator is what you need the most. 

You can access the online Mutual Fund calculator tool from anywhere you want, making it incredibly convenient to perform any financial planning on the go.

Final Words

You now know very simple ways to calculate returns on Mutual Fund investments. To know the NAVs of MF schemes, you may have to go to the website of AMFI (The Association of Mutual Funds in India) at www.amfiindia.com.

Have you tried any other way to calculate mutual fund returns? What result did you get? How much time did it consume? Kindly share your views in the comment box.

If you are  inclined to make this solid difference in achieving your financial goals by creating a financial plan, then I would suggest you to test-drive our services by opting for