Mutual funds are a way of spacing your surplus money in structures that are according to your investment needs. Every investor is looking to put his money in an investment scheme with the hope of getting maximum returns out of it. For this reason, the rate of return is one of the top factors that should be considered while investing. Rate of return is a unique characteristic of mutual fund type of investment. They are prevalent with many investors because they bring attractive returns, and the investor does not directly get involved with the management.
Mutual fund returns help to determine the increase or decrease of the value of investment over a certain period of time. They are calculated on an annual basis and mostly in percentages. Calculation of this percentage is not hard and in most cases, the percentage is given to the investor by the mutual fund manager.
The return of mutual fund is usually calculated on a rate basis of compound average annual return. This means that along with earning a return to the original investment, you will also earn a return on the return as well. However, the figures include any expenses that have been acquired in the process. These include capital gains (or losses), sales commissions and dividends, all of which are stated in percentages.
It is also important to note that the returns one actually gets are majorly influenced by other factors that an investor should evaluate before investing. These factors are fund charges, taxes that are payable at times, fees and expenses, age and size of the funds as well as the risk issues involved. It is always wise for the investor to carefully examine these factors and notice how positively and negatively it will affect the mutual fund returns.