How does mutual fund return calculator work? What are its types?

Posted by swarali chavan on April 21st, 2019

Mutual funds are a popular investment option in India owing to its high returns and portfolio diversification. The performance of a mutual funds results in various types of returns.

Using the mutual fund calculator, you can analyse these returns easily:

1)      Absolute return: It means the increase or decrease in mutual fund investment is in percentage. In absolute returns, you can use the mutual fund return calculator method only on the schemes whose tenure is less than a year.  

2)      Annualised return: It measures the growth value of your mutual fund investment. Say you have invested INR 1 lakh in a scheme. The investment grows to INR 1.4 lakh in three years. So, your absolute return is 40 per cent, but the annualised return is 11.9 per cent owing to the compounding effect.

3)      Total return: It means the total returns you have earned from your investment regarding the capital gains and dividends.

4)      Trailing return: It means annualised return over a trailing period that ends today. So, the mutual fund calculator will use the formula –

Current NAV / NAV at the beginning of the trailing period ^ 1/trailing period – 1

5)      Point to point return: The annualised returns are recorded between two points of time. In point to point return, you only have to calculate the starting and closing date of the scheme.

6)      Annual return: As the name says, yearly returns are the profits earned from January 1 to December 31. Say the NAV of the scheme on January 1 is INR 100 and INR 110 on December 31, the annual return you receive is 10 per cent.

7)      Rolling returns: They refer to the annualised returns of a scheme over time. The rolling return period could be daily, weekly, or monthly. Rolling returns are used until the last day of the duration in comparison to the benchmark of the plan.

What is the purpose of the MF calculator?

The mutual fund return calculator is available online on all the mutual fund houses website. It helps you to understand the returns you have yielded from the invested capital.

You should enter details such as the name of the mutual fund, scheme, and the ‘from’ and ‘to’ date of return. You then must click ‘calculate.’

The result page portrays annualised and absolute returns which you have availed from 1 week to a maximum period of 5 years.

Mutual funds offer separate calculators for SIPs and ELSS. However, there is no such instrument in place for exchange-traded funds, which are a part of mutual funds as well.

What are ETFs?

They are low-cost mutual funds which solely depend on stock trading. ETFs track indexes such as Nifty and Sensex. For conducting ETF transaction, you require a Demat and trading account in India. The accounts are used for buying and selling stocks.