How to check Mutual Fund returns
20 December, 2024
If you look into team management ‘invests’ a lot of money and time on the cricketers. Then, the coach and manager analyse the performances by looking at the match's strike rate, averages and videos. Then, the team management decides whether or not the ‘returns’ cricketers are giving in terms of their performances are aligned with the time and money being invested in cricketers. The non-performers are then replaced. It would have been cool if such a system existed for mutual funds. Then, you could easily analyse the performance of mutual funds and replace the non-performers with performers in your portfolio to improve the strike rate of your investments. If this is your thought process, you are on the right track. Tracking the performance of your investments is necessary to achieve the objective of investing.
How to check mutual fund performance?
Here are some tips on how to check mutual fund returns:
Use Online Portfolio Trackers
Several mutual funds these days offer online dashboard services to investors. Creating an online account lets you get regular updates on your mutual fund investments. The portal shows you the current value of your assets and associated returns across different periods, such as 1 month, 6 months, 1 year, etc. Some portals also benchmark returns against category averages.
For example, the HDFC Bank SmartWealth App allows you to consolidate and track returns across mutual fund investments from different fund houses in one place. The consolidated view makes performance tracking seamless.
Mobile Apps
Users can access portfolio anywhere, anytime from mobile app. SmartWealth app provide real-time updates of mutual fund on scheme performance, fund prices, total returns earned, etc.
Also, you can simply download the HDFC Bank SmartWealth app and check returns on the go for greater convenience.
Physical Account Statements
Though online sources are easier, you can also rely on physical account statements from AMCs to know your mutual fund returns. Mutual fund companies issue account statements periodically that show details like opening balance, transactions, closing balance and returns earned for the statement period.
For regular income plans, you may receive monthly or quarterly statements. For growth schemes, annual statements are more common. Verify returns figures mentioned in the statements for accuracy.
Calculate Using CAGR
The compounded Annual Growth Rate (CAGR) indicates the annual return generated by your mutual fund investment over time. Here is how to check CAGR of mutual fund manually using your investment details:
CAGR = (End Value/Beginning Value)^(1/No. of years) – 1
For example, if you invested ₹1 lakh in a fund 3 years back and its current value is ₹1.3 lakhs, the CAGR of your investment is:
(1.3/1)^(1/3) - 1 = 10%
A higher CAGR indicates better fund performance over time.
Compare Returns with Benchmark
Do not view returns in isolation. Gauge how your fund’s returns fare against its benchmark index returns. For an equity fund, compare its returns with its benchmark returns over one year, three year and five year time frame.
If your fund has consistently outperformed the benchmark, it has delivered alpha and indicates sound stock selection by the fund manager. Use benchmarks as yardsticks.
Factor in Risk Parameters
Risk and returns have an inverse relationship. Review risk metrics like beta, standard deviation, etc., to normalise returns with the risk level.
For example, a fund generating 18% returns with a beta of 1.5 is considered better than a fund generating 20% returns but with a higher beta of 1.8. Risk-adjusted returns matter more than just raw returns when comparing fund performance.
Consider Tax Impact
Do not overlook the tax impact on your mutual fund returns. For debt funds, the indexation benefit reduces the tax incidence on long-term capital gains. Only a 10% LTCG tax applies to gains above ₹1 lakh in a year for equity funds. Factor in post-tax returns earned by you.
Account for Expenses
Returns disclosed in mutual fund statements or portfolios are shown before charging recurring expenses. But expenses impact your actual investible returns significantly. Determine returns by deducting expense ratio and other costs to know real returns.
Evaluate returns from multiple sources. Focus on risk-adjusted, benchmark-relative figures after accounting for taxes and costs. This will present a truthful picture of how your mutual fund investments have performed historically. Tracking returns regularly is vital to making informed investment decisions to achieve your objectives.
Download the HDFC Bank SmartWealth App from Playstore/Appstore to quickly check your investment performance with a simple dashboard and reports.
Disclaimer: This communication has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. HDFC Bank Limited ("HDFC Bank") does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. HDFC Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document. HDFC Bank may at any time solicit or provide commercial banking, credit or other services to the Mutual Funds / AMCs referred to herein.
Accordingly, information may be available to HDFC Bank, which is not reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication. HDFC Bank neither guarantees nor makes any representations or warranties, express or implied, with respect to the fairness, correctness, accuracy, adequacy, reasonableness, viability for any particular purpose or completeness of the information and views. Further, HDFC Bank disclaims all liability in relation to use of data or information used in this report which is sourced from third parties.
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