A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment company in the UK.
How can I get my mutual fund returns?
Like other asset classes, mutual fund returns are calculated by calculating the appreciation of the value of your investment over a period compared to the initial investment made. The net asset value of the mutual fund indicates its price and is used to calculate the returns on mutual fund investments. The return over a period is calculated as the difference between the NAV sale date and the NAV purchase date at the NAV purchase date and converted as a percentage by multiplying the result by 100. Any net dividend* or other distribution of income by the fund during the holding period is also added to capital appreciation when calculating total returns.
The appreciation of capital in mutual funds is reflected in the increase in NAVs over time. This happens because a fund’s NAV is derived from the stock prices of the companies included in the fund’s portfolio, and prices fluctuate every day. Changing a fund’s NAV over time contributes to the appreciation or loss of capital in your holding. View the return on your investments in the statement provided by the house of funds. This statement captures both your transactions and the return on your investments.
Note: *The NAV of a Fund is within the extent of dividend payment and statutory withdrawal, if any.