Beginner's Guide to Mutual Fund Returns

Stop guessing! Learn to compare Indian mutual funds effectively. Don't fall for flashy numbers alone. Invest smarter, not harder.

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Absolute vs. Annualized Returns

Absolute returns show simple gains for any period. For investments >1 year, always use CAGR (Compound Annual Growth Rate) – it shows true yearly growth, smoothing market ups & downs.

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Compare Against the Benchmark

A fund isn't just competing with other funds; it's competing with an index. Has it consistently beaten its Nifty 50 TRI or SENSEX TRI benchmark over years? That's the real test!

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Time Horizon & Consistency Matters

Avoid 1-year traps! Mutual funds are long-term. Evaluate returns across 1, 3, 5, 10 years. Look for consistent outperformance against its benchmark, not just short-term rallies.

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Risk-Adjusted Performance

It's not just how much you made, but how you made it. Use Sharpe Ratio (more return for less risk) and Standard Deviation (volatility) to pick funds that suit your risk appetite.

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Beware Hidden Costs & Traps

Expense Ratio (annual fee) and Exit Load (early exit fee) eat into returns. Choose direct plans for lower expenses. Don't chase 'hot funds' or compare different fund categories!

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