How to calculate Mutual Funds returns in percentage?

A mutual fund invests in a company’s bonds, shares, or stocks. An individual can buy shares and gets a reward from company profit. The percentage of dividends rises with the share’s value. 

You can calculate the return percentage on your share. The mutual fund’s calculator helps in assessing the return in percentage. There are two types of mutual fund investment. 

Systematic investment plans (SIP) and lump sum investments are two different types. You can choose any one or go for a combination. 

SIP is a monthly, quarterly, and monthly mode of investment. It is more suitable for disciple investment plans.

However, a lump sum long-term investment means paying the full amount in one go. You can calculate using a mutual fund calculator.

You may check the mutual funds calculator usage process given below.

How does the mutual funds calculator work?

Any investment in mutual funds comes with returns in percentage. It would help if you learned how to work with a mutual funds calculator. Use the calculator for return assessment if you invest in SIP, lump sum, or combination. 

You can put the principal investment amount and expected return in the calculator. The mutual fund’s calculator tells the amount to be paid at maturity. You can put the maturity amount to know the rate of return.

You can flip one thing with another and know the desired investment information.

Types of returns on mutual funds

In mutual funds, there are six types of returns. Absolute, annualized, total, point-to-point, trailing, and rolling returns. Annualized and absolute are two expected returns on mutual funds. 

Mutual funds calculator can assess both types of return in percentage

• Annualized return

Annualized return means earning a return amount on mutual fund investment annually. The investment growth rate is assumed to be constant. Let’s use the same example using the mutual fund’s calculator for assessing. 

For example, Mr. B invested Rs.1 Lakh in a long-term mutual fund in January 2017. Now the value of the investment is Rs.1.3 lakh in January 2020. So the investment return is calculated based on 3 years.

The formula of absolute return is,

Annualised return = (Final investment value ÷ Initial investment amount) ^ (1/number of years)-1

= [(130000 ÷ 100000) ^ (1/3) – 1]

= 9.045%

Hence, Mr. B’s investment has grown by 9.04% annually for 3 years.

• Absolute return

Absolute return on mutual funds is the total change in the value of mutual funds investment. This amount is given at the redemption time. It is expressed in (%) form.

For example, Mr. S invested Rs.1 Lakh in a mutual fund in January 2017. Now the value of the investment is Rs.1.3 lakh in January 2020. So the investment return is calculated based on 3 years.

The formula of absolute return is,

Absolute return = (Final investment value- Initial investment amount) * 100/ (initial investment amount)

= (130000-100000)* 100/100000

= 30%

How to calculate SIP return using a mutual funds calculator?

The SIP is a monthly, quarterly, or yearly payment in mutual funds investments. So, the mutual fund’s calculator works on the holding period of each SIP. 

The holding period refers to the period of investment and withdrawal of a particular SIP. An individual buys the units of mutual funds based on net asset value. The net asset value varies from day to day of each month. 

When you redeem the investment, you get the amount of all units x net asset value of the present day. You can predict the return on investment using a mutual fund calculator. 

Use extended rate of return (XIRR) for overall return on investment. The XIRR is the sum of CAGRs on each SIP Investment. It would help if you used the SIP calculator for assessing, as the CAGR calculator takes extra time. 

It simplifies the SIP and SWP calculation. And, gives the combined value of the return percentage on investment. It is also helpful in maintaining cash flow using SIP and SWP.

Let’s understand the SIP return calculation with an example. The mutual fund calculator for SIP is the best option for calculating the return percentage.

Mr. A invests Rs.2000 in SIP mode for 5 months. The principal amount after 5 months is Rs 10000. But Mr. A gets a total of Rs 11000 at the withdrawal.

Let’s see how?

Date of SIP	Amount deposited
March 01, 2015	Rs2000
April 01, 2015	Rs2000
May 01, 2015	Rs2000
June 01, 2015	Rs2000
July 01, 2015	Rs2000
Final return amount at the redemption of investment	Rs 11000

Formula of SIP return percentage = P [(1+i) ^ n-1] * (1+i)/i

Here P stands for the principal amount (principle/investment), and I stands for the interest rate. Now you can calculate your SIP return with any amount.

XIRR of SIP investment is 45.27% per annum.

How to calculate lump sum investment on mutual funds?

In lump sum long-term investment, you get annualized and absolute returns. The mutual fund’s calculator helps in assessment with separate formulas.

The lump sum long-term investment formula calculates only less than 12 month period amount. It is always expressed in a percentage format. 

The formula of absolute return is given below. Here the NAV stands for the net asset or market value of each investment unit. 

(the current NAV – the beginning NAV) / beginning NAV x 100. 

Let’s assume your present NAV is 45, and the beginning NAV is 30. The absolute return will be 60% for a <12 months period.

The annualized return formula, however, works best with an investment period of more than 12 months. You can use the mutual fund’s calculator for quick assessment.

The formula for a simple annualized return is given below.

 [{1+ absolute rate of return} ^ (365 / number of days)] -1. 

CAGR and combined annual rate help analyze the average rate of return. You can calculate for more than 12 months. The formula is given below.

 [{(current NAV/ begging NAV) ^ (1/number of years)]-1} x 100.

You can use the same formula for monthly return calculation. Just replace the number of years with several months.

You can use the alternative formula of CAGR = (current value/initial value)1/n-1. Here N stands for the number of years.

Final Words

The mutual funds calculator is a one-stop solution. You can calculate the return percentage from your home using a simple calculator. There are various formals, but they are time-consuming. 

You can compute any amount with a long-term mutual fund calculator. SIP or lump sum investment, either combination or separate, can all be calculated. Know your investment and choose wisely.

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