Mutual fund total return

[abhas_singh]

The NAV of the mutual funds takes into account the expense ratios, cash and the total underlying securities. So, calculating the return just based on the change in NAV can be misleading. For example a steep increase in fund inflows due to popularity of the fund (like what happened in 2017-18) madness can cause the NAV to increase. So, how does one go about gauging the real returns from a fund ?
Please correct me if I said something wrong. @siva-reddy @Bhuvan

[Bhuvan]

@abhas_singh

For example a steep increase in fund inflows due to popularity of the fund (like what happened in 2017-18) madness can cause the NAV to increase.

For the NAV to go up, the prices of the underlying securities have to increase. Flows affect the size of the fund, not the NAV. Your return is basically the price at which you bought the fund and the current price, it’s as simple as that. If you are interested here’s how the NAV of a fund is calculated:

Regular vs Direct Plan in MFs

Hi Shivam, NAV of a scheme is derived from the summation of several factors or variables which is known as the profitability metric. It consists of the following variables : (1) Interest income (2) + Dividend income (3) + Realized capital gains (4) + Valuation gains (5) – Realized capital losses (6) – Valuation losses (7) – Scheme expenses As you can see the 7th variable which is the scheme expenses is a subtraction so basically the NAV would be lesser if this is higher. The expense rat…

To know more about measuring your returns, check this post:

Measuring Mutual Fund Returns (XIRR & CAGR)

Return in simple words helps you estimate the rate at which money grows on a year on year basis. For example, you invest in a property worth 1 Crore and exactly after a year, the value of this property is 1.2 Crore, then the return (or growth rate) is 20%. However, if exactly after 2 years, the value of this property is still Rs. 1.2 Crore, then the return is no longer 20%, because it is 20% over two years. The common practice is to express returns on an annualized or year on year basis. The y…

[abhas_singh]

thanks