How to Calculate Mutual Fund Performance and Returns?

As we progress through our career and financial goals, there would come a time when you are required to take informed decisions on financial planning. Each time, you would have to take a call on the evaluation of the investment and how well you are planning it out. Yes, there has to be a diversified approach to your investment, but having a constant watch over the growth is a must.

Mutual funds are a common choice by many to plan out their investment for a long period. Equity based funds almost always beats other investment forms in the market today. To evaluate the performance of your fund, it is important to keep a benchmark. This benchmark will and must always give you an idea of exiting or progressing ahead.   

So, how would you go about this? Here are a few simple methods –

1.       Absolute return: The two most important dates with respect to an investment are – the beginning date and the end of the holding. This is calculated by the dividing the absolute change in the NAV from the investing period and the NAV during the start of the investment. The simplest advantage is that we can use this calculation on any kind of fund to track out the return. (NAV(end) - NAV(start))/NAV(start) would give you the percentage increase.

2.        Total return in fund: Another method to calculate the total return that has come from the fund is to include the dividends that are in place too. This can be calculated by adding the dividends which are spread across the holding period and with the total change to the NAV, divided by the NAV at the initial day. {Dividends +[NAV(end) - NAV(start)]}/NAV(start)

With these calculations, the mutual fund performance can be tracked and you would be able to know when the fund is performing well as per your ‘benchmark’.