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Unlike Fixed deposits, returns calculator happens differently in mutual funds. In fixed deposits, one gets fixed interest. In mutual funds, the returns are simple as:
price at which you sell priceat which you buy
Now, this may look simple but now brings the uncertainty of the price at which you will sell.
Different categories have different types of returns and risk levels. Within a category as well, the returns vary based on the performance of each mutual funds scheme. That is the reason why you see different returns for different schemes.
This technique helps the investors in calculating simple returns upon their initial investment. For calculating the same, the investors would need the initial as well as the ongoing or the last NAV (Net Asset Value) of the particular SIP scheme. For calculating the absolute or point-to-point return, there is no role of the holding period. Therefore, in case your starting NAV was like, 20 INR and after a period of three years, it has become 40 INR, then the absolute or point-to-point returns would round off to 100 percent.
For calculating your returns with this technique, you just need to apply the formula as:
Absolute return = (current NAV initial NAV) / initial NAV x 100.
You can put this formula on an excel sheet and then you can start your calculations. You can use the formula for calculating the returns while the holding time tends to be less than one year.
Some people might wish to annualize their overall return that is generated while the holding period tends to be less than one year. This technique is also known as the effective annualized yield. This is actually referred to as the extrapolation of the returns. This does not give the original picture. In case you wish to annualize the SIP returns, then you can use the following formula:
((1 + Absolute Rate of Return) ^ (365 / number of days)) -1.
You can put this formula into the excel sheet for calculating the returns.
The absolute return has been made compulsory by the SEBI (Securities and Exchange Board of India) to be simple annualized while the period tends to be less than one year.
You should have a clear idea on how to invest in a mutual fund before proceeding with the investment. For that, click here.
When the tenure for your SIP investment tends to be more than one year, CAGR can be an easier way of calculating the returns. This usually depicts a figure that reveals the manner in which the investment should have grown if it had been generated as the steady return. But, in reality, the expected returns might not tend to be equal every year. This is the reason CAGR is used to represent the mean annual growth rate which tends to smoothen the volatility occurring in the returns upon a certain time period.
When you are using CAGR for calculating returns of your SIP investment, then you can make use of the formula as:
((( Ending Value / Beginning Value) ^ (1 / number of years)) 1 * 100
Make use of these simple steps for calculating the returns on your SIP investment. Thus, you can analyze the growth of your investment in a better way.
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Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
Groww is an investing platform where users can find the best mutual funds to invest in and can invest their money without any hassles. Groww provides objective evaluation of mutual funds and does not advice or recommend any mutual fund or portfolios. Investor shall invest with their own descretion. Groww does not guarantee any returns and safety of capital.
By providing objective evaluation of products available on Groww
By bringing up red flags, if any, involved in the products. However Groww does not guarantee to bring out all red flags
By being transparent about fees and charges involved in investing in a product
By clearly representing the risk associated with buying a product
All transactions on Groww are safe and secure. Users can invest through SIP or Lumpsum using Netbanking through all supported banks. It uses BSE Star MF (with Member code 11724) as transaction platform.
Mutual fund investments are very popular with individual investors because of the benefits they provide. Among the many advantages, the most important factors that drive investors to mutual funds are that Investors can
– Start with any amount (as low as 500) – Diversify across multiple stocks and other instruments like debt, gold etc. – Start automated monthly investments (SIP) – Invest without requiring to open DMAT account
All type of mutual funds are available on Groww.
Portfolio is collection of mutual funds designed to meet your investment goals. Investing in mutual fund portfolios helps you in diversifying your investments and reduces the risk. Portfolios also help you in assigning an investment goals and make it easy for you to save for and achieve your goals. You can create a portfolio yourself or ask an expert to build it for you.