Guide to Mutual Funds
Module Units
- 1. Introduction: Mutual Funds
- 2. How Does a Mutual Fund Investment Work?
- 3. Different Types of Mutual Fund Schemes
- 4. How Can a Customer Invest in Mutual Fund
- 5. Fundamental Attributes of Mutual Fund Scheme
- 6. Types of Mutual Funds
- 7. Concept of AUM
- 8. Equity Mutual Funds
- 9. Debt Mutual Funds
- 10. Hybrid Mutual Fund
- 11. Solution-Oriented Schemes
- 12. New Fund Offer (NFO)
- 13. Offer Document
- 14. Types of Risk in Mutual Fund
- 15. Net Asset Value
- 16. How do mutual funds calculate the reserve for declaring dividends?
- 17. Expenses Charged on Mutual Funds
- 18. What is Dividend Distribution Tax & when it is Levied?
- 19. Debt Mutual Funds
- 20. What is Indexation?
- 21. Risk Return and Performance of Funds
- 22. Types of Risks in Popular Mutual Fund Schemes
- 23. Which Factors Affect the Returns in a Mutual Fund Schemes
- 24. Methods Used To Evaluate The Performance Of A Mutual Fund
- 25. Mutual Fund Structure and Constituents
- 26. Key Personnel of an Asset Management Company
- 27. What are the objectives of AMFI?
- 28. Must know Concepts and Terms
- 29. Facilities and services that the investors GetS
- 30. Mutual Fund Advisors
- 31. Types of Commission for Mutual Fund Advisors
- 32. Mutual Fund Frequently Asked Questions
- 33. What are the KYC requirements?
Methods Used To Evaluate The Performance Of A Mutual Fund
To evaluate a fund's performance, digging out its returns is one of the most important ways. To do that, let's understand two of the most common methods of calculating returns-
Absolute returns
It’s the simple increase or decrease in the rate of return without taking the change in time into consideration.
If you've invested Rs. 2,75,000 and now the investment is worth Rs. 5,25,000, your absolute return is 90.9%.
This method works well for investments held for less than a year. For longer periods, like over a year, you need to figure out the yearly return rate, which is called annualizing returns.
Annualised returns
The Compound Annual Growth Rate (CAGR) shows how much an investment grows on average each year as if it grew steadily every year. It smoothens out the ups and downs of growth over the investment period.
How to calculate CAGR?
CAGR = [(Current Value / Beginning Value) ^ (1/# of Years)]-1
You can also use the XIRR function in Excel to find the same.
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