How I see is that there are two parts to your question.

Returns calculations when inflows are periodic or irregular.

Returns calculations after taking care of all types of charges. How these charges are factored in the returns?

First part is obviously the one which you have asked but the other one is also equally important to know the complete picture about returns. Let us cover both of these parts.

1. Returns calculations when inflows are periodic or irregular.We have covered this topic in detail in our blogDifference between Absolute and Annualized Returns. I highly recommend you to read this. And for your convenience am reproducing some relevant parts below:

Example – Periodic investment in a Mutual Fund

It s a bit difficult to calculate annualized return of a monthly recurring installment. This is because each investment does not get invested for the entire year.

Ex- Suppose one is planning to invest Rs. 12 Lakhs in a year and is making a monthly investment of Rs. 1 Lakh every month. The person finds out that after one year the investment has grown to 12.8 Lakhs.

In this example, the absolute returns will be calculated as follows:

The investor may get disappointed to see just a 6.67% absolute return. However, this is not the correct representation of return. This is because the investor has not invested entire 12 lakhs for the entire year. He has invested only 1 Lakh for the entire year. Similarly, he has invested 1 Lakh for only 11 months. Another 1 Lakh for just 10 months….and so on.

Now the question is how to calculate the annualised return to get the correct picture? For this, there is a simple method available in MS Excel. We can use XIRR function in MS excel to calculate the annualised returns:

XIRR Calculation in Ms-Excel-XIRR(Amount Invested,Investment Date)

If one calculates return from above method, one can observe that the annualised returns are significantly higher than the absolute returns in the above example.

2.Returns calculations after taking care of all types of charges. How these charges are factored in the returns?

There are many charges which a mutual fund incur on an ongoing basis, viz: operational expenses, management fees, marketing and distribution fees, transfer agent fees, custodian fees and audit fees. Well these charges are adjusted on a daily basis and are accounted for within daily NAV at close of business every day.

So, when we calculate the returns based on declared NAV of the mutual fund we have already taken care of these charges. But please understand that now, the inflows and outflows also account for the NAV calculation. There is some surplus cash / liquid fund in each fund house which is used for the outflows on daily basis, but if there is a large redemption than the mutual fund manager will have no other choice but to sell his units to adjust for the outflow.

Similarly, there can be excess inflows which needs to be utilized for the purchase of equities. A very informative article on this topic isHow to calculate NAV

In the end, I leave with one observation. Dividend yield of NIFTY 50 index is 1.1% to 1.4%. And many Large cap mutual funds, post charges show out performance of 1 to 2% which is easily achieved by utilizing the cash flow from dividends by them. So, think twice before falling for any such funds as fund manager may not be really working hard for your money to work harder than you!

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