If you are an investor , chances are you had to calculate your potential Mutual Funds Returns investment at some point. Whether you’re trying to figure out how much returns can I expect from mutual funds? Or comparing your sip and lump sum investment , it’s very much important to know how to do this correctly.

You can follow an easy formula to calculate the return on investment in mutual funds

Absolute Returns = [(Current NAV – NAV at the time of purchase) / NAV at the time of purchase] × 100

We’re here to  this easy for you. In this blog post, we’ll walk you through the different ways for calculating the returns on mutual funds. By the end of this post, you’ll be an expert at knowing how are returns calculated in mutual funds!

Also see : Mutual Fund Calculator

Absolute Returns 

Absolute returns are simply the difference between the current net asset value (NAV) of the fund and its NAV at a previous point in time. To calculate absolute returns, you use the following formula:

Absolute Return = (Current NAV – Previous NAV) / Previous NAV * 100

For example, if the current NAV of a mutual fund is Rs. 100 and its NAV one year ago was Rs. 90, the absolute return for the fund would be 11.11% (100 – 90 / 90 * 100 = 11.11%).

Annualized returns

Annualized returns are a more accurate way to measure mutual fund returns over time, as they take into account the compounding effect of returns. To calculate annualized returns, you use the following formula:

Annualized Return = (1 + Absolute Return)^(365 / Number of Days) – 1

For example, if the absolute return for a mutual fund over the past year is 11.11%, the annualized return for the fund would be 11.37% (1.1111^(365 / 365) – 1 = 0.1137).

Compounded Annual Growth Rate

Compounded Annual Growth Rate (CAGR) is a metric that is used to measure the average annual growth rate of an investment over a specified period of time. It takes into account the effect of compounding, which means that the growth builds upon itself.

CAGR is calculated using the following formula:

CAGR = ((Ending Value / Beginning Value)^(1 / Number of Years)) – 1

For example, if an investment grows from $100 to $200 over a period of 5 years, the CAGR would be 14.87%.

CAGR = ((200 / 100)^(1 / 5)) – 1 = 0.1487

Extended Internal Rate of Return

Extended Internal Rate of Return (XIRR) is a financial metric that is used to calculate the annualized return of an investment that has irregular cash flows. It is a more accurate measure of return than the Internal Rate of Return (IRR), which does not take into account the timing of cash flows.

XIRR is calculated using the following formula:

XIRR = (1 + Net Present Value (NPV) / Beginning Investment) ^ (1 / Number of Years) – 1

Why is it important to calculate mutual fund returns?

By calculating your mutual fund returns, you can track how your investments are performing over time. This can help you to see if your investments are meeting your goals and to identify any underperforming funds. you can make more informed investment decisions in the future. For example, if you are not satisfied with the returns of a particular fund, you may want to consider selling your shares and investing in a different fund.

How to calculate for SIP mutual funds investments?

Let’s say you invest Rs 2,000 per month in a SIP for a tenure of 24 months and expect to earn a 12% annual rate of return. The SIP calculator formula would calculate your future value as follows:

FV = P * ((1 + i)^n – 1) * (1 + i) / i

FV = 2000 * ((1 + 0.12)^24 – 1) * (1 + 0.12) / 0.12

FV = 264667.74

This means that at the end of the 24-month period, you will have approximately Rs 2.65 lakhs in your investment account.

How to calculate for lumpsum mutual funds investments?

Using the FV formula, we can calculate the future value of your investment as follows:

FV = PV(1+r)^n


  • FV = Future value
  • PV = Present value (Rs 100,000)
  • r = Rate of interest (12%)
  • n = Number of years (10)

FV = 100000(1+0.12)^10

FV = Rs 313842.95

Therefore, the future value of your investment will be Rs 313842.95 after 10 years.

In addition to the future value, you may also be interested in the wealth gain. The wealth gain is the difference between the future value of your investment and the present value. In this case, the wealth gain is:

Wealth gain = FV – PV

Wealth gain = 313842.95 – 100000

Wealth gain = Rs 213842.95

This means that your investment will grow by Rs 213842.95 over 10 years.

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