Before we start talking about Mutual fund returns we should know what is mutual fund? And why should we invest in Mutual fund?
What is Mutual Fund?
A mutual fund collects money from investors to purchase securities and this fund is managed by professionals. There is a variety of mutual funds but most popular is equity, debt, and hybrid.
Why should we invest in Mutual Fund?
People are now days going crazy about mutual funds but why? What is the reason for that? We are here to tell you.
- Professionally
Managed – As we have said before that mutual
funds are managed by professionals. You may not have the knowledge
or the time to invest your money in proper place. A mutual fund
allows you to pool your money with the other investors. Portfolio
manager s decides where to invest the money in the fund and when to
buy and sell investments.
- Higher
Returns – Isn’t it so good to get higher returns.
When you are investing in other places you get a percentage of 7-8%
of your money and the tenure is so long for this kind of percentage.
But when you are investing in mutual funds the return is very high
even some times it is like 16-30%.
- Easy to buy
and sell– Mutual Funds are available in banks, financial
planning firms, trust companies, credit unions and also in
investment firms so whenever you want to buy a mutual fund you can.
And if you want to sell yours you just can go any of these places
above mentioned and sell your fund and can get access of your money.
- Variety– There is a wide range
of fund from you can choose
1. If you are young and just started a job you can
invest in equity funds. The time is so long and the return you get
after the time is huge
2. If you are middle aged and middle of your carrier
you can invest on balanced mutual fund. The risk is moderate here.
3. If you are retiring invest on bond fund.
Let’s get back to the topic here we will talk
about mutual fund returns. Returns which depend upon the performance
of the fund are defined as mutual fund returns. So here we will
discuss about various types of returns.
- Absolute Returns –
Absolute Returns or Point-to-Point returns indicates the increase or
decrease in investment, in terms of percentage. The time taken for
this change is not accounted for. The absolute returns method of
calculating returns is used for mutual
funds with a tenure less than 1 year. If the period is more than
one year, the investor has to calculate annualized returns.
- Trailing Returns– It
is the annualised return over a particular trailing period which
ends today. For instance, if the NAV of a MF scheme today is Rs.100,
and it was, let’s say, Rs.60 three years ago. 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. Therefore, your three-year trailing return will be
18.6%. In case the scheme’s NAV five years ago was Rs.50, the
five-year trailing return shall be 14.9%
- Annualised Return– As
the term implies, annualised returns measure the amount of growth in
the value of your investment on an annual basis. For instance, let’s
say that you made an investment of Rs.1 lakh in a MF scheme. In a
span of three years, your investment has grown to Rs.1.4 lakh. In
this case, your absolute return is 40%, but your annualised return
is 11.9% because of the compounding effect.
- Rolling Returns– They
refer to a scheme’s annualised returns over a particular period of
time. Rolling returns periods can be daily, weekly or monthly and
shall be used until the last day of the duration in comparison with
the benchmark of the scheme (for instance, Nifty, CNX – Midcap,
CNX – 500, BSE – 200, BSE – Midcap, etc.) or fund category
(for instance, midcap funds, large cap funds, balanced funds,
diversified equity funds, etc.)
Compound Annual Growth Rate is used to calculate the
returns from mutual funds investment which has a holding period that
exceeds a year. This would reduce the short-term fluctuations and
volatility of the Net Asset Value of the funds. Under this method of
calculating returns from mutual funds, it is assumed that the
investment is growing at a steady pace
In order to calculate the Compound Annual Growth
Rate (CAGR) manually, the equation is as follows:
CAGR = [(Current Net Asset Value / Beginning Net
Asset Value) ^ (1/number of years)]-1
- Total
Return– It refers to the actual returns you have
accrued from the investment. It includes dividends as well as
capital gains. For instance, let’s say that you made an investment
of Rs.1 lakh in a MF scheme, and the NAV was Rs.20. Since you made
purchases worth Rs.1 lakh and the NAV is Rs.20, it means that you
purchased 5,000 units. After a year, the NAV of the MF scheme
increases 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. Now, in case the scheme 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–
It is the annualised return recorded between two points of time. All
you need to calculate point to point returns is the start date and
the closing date of a mutual fund scheme.
Returns of various Mutual Funds in INDIA
Returns from moderate Risk Equity Funds
Fund Scheme | 1 year | 3 year | 5 year |
Aditya Birla Sun Life Frontline Equity Fund (G) | 4.77% | 8.79% | 16.82% |
|
|
|
|
DSPBR Equity opportunities Fund Reg (G) | 4.28% | 11.50% | 19.01% |
Franklin India Bluechip Fund | 5.63% | 7.32% | 14.57% |
Returns from high Risk Equity Funds
Fund name | 1 Y | 3 Y | 5 Y |
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 savings Funds
Fund Name | 1 Y | 3 Y | 5 Y |
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 savings Funds
Fund Name | 1 yr | 3yr | 5yr |
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
|
Return from Theme funds
Fund Name | 1Y | 3 Y | 5 Y |
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 Name | 1 Y | 3 Y | 5 Y |
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 Name | 1 Y | 3 Y | 5 Y |
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 NAME | 1 YEAR | 3 YEAR | 5 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 NAME | 1 YEAR | 3 YEAR | 5 YEAR |
Tata Treasury Advantage Fund | 6.66% | 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 NAME
|
1 YEAR
|
3 YEARS
|
5 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 NAME | 1 YEAR | 3 YEARS | 5 YEARS |
Reliance Medium Term (G) | 6.05% | 7.64% | 8.11% |
Returns from long term debt funds –moderate risk
FUND NAME | 1 YEAR | 3 YEAR | 5 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 NAME | 1 YEAR | 3 YEAR | 5 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% |