What Is Average Mutual Fund Return? How Does It Work?

Investing in Mutual Funds? What is your average mutual fund return rate on Investment? How do you calculate the returns on the mutual fund and what do they imply?

Before focusing deeper on this subject, let us take a look at the basic topics to better understand this idea.


Mutual Fund is the capital the investors receive by investing in the purchase of company shares, shares, or bonds.

The handling of investments is the responsibility of a professional fund manager to achieve the possible average of annual returns. This is how mutual funds operate, not only in India but worldwide.

All mutual funds are licensed with the Securities Exchange and the Board of India and your outlay is therefore safe.


Mutual funds invest in a wide variety of securities from equity to debt. The measurement of performance depends on the increase in the fund’s overall market capitalization.

Another important consideration is that the risk reduces through the investment portfolio-meaning investors are achieving substantial diversification at a very low price.

For example, an investor buys a mutual that happens to own several company shares, when one specific company does not perform well on the market.

The investor loses just a fraction of their overall investment because the particular company just occupies a small portion of the portfolio of the fund.

Different types of mutual funds generate different returns. Mutual funds are generally classified into three categories based on their investment characteristics and the risks involved.

Understand all types of mutual funds and analyze them to check whether your requirements would be met by investing in a specific type of mutual fund.

Equity mutual funds

These funds aim to achieve high average returns by investing through all market capitalizations of corporate stocks.

They are the most volatile type of mutual funds, and thus have the ability to produce greater MF returns

A debt mutual fund can be lending money to the issuing company on credit. A debt fund invests in assets that generate a fixed average return. The debt instruments have a pre-decide the rate of return

Hybrid mutual funds balance the risk and achieve a particular rate of return, balanced or hybrid funds invest in equity and debt instruments alike. The manager decides on the ratio of the debt and equity instruments to reap the best mutual fund returns.



For mutual funds with a term of less than 1 year, the absolute return method of calculating returns is applicable.

As it does not take into account the investment cycle and its compounding impact, it is rarely used for calculating or assessing the return on the mutual fund over a longer period.


As the name suggests, this return is measured over 1 year and expressed as an annual percentage weighted in time.

In the simplest sense, the annual return is the benefit or loss of your initial investment in the mutual fund for one year.

This number allows you to evaluate the return of the mutual fund for any given year in which you keep the investment. It’s used more often by investors because the calculation is fairly easy.


The above return is applicable to measure the return of a mutual fund over time in several ways.

Unlike annual returns, it is based on the full retention period of the investment, regardless of whether it is shorter or longer than a year.


They relate to the annualized return of a fund over a given period. They can be daily, weekly, or monthly and at regular intervals.

It measures the absolute and relative performance of the fund over some time.

Rolling returns take about 3-5 periods at different intervals to see how the fund has done over the given period. Different market conditions due to different periods affect the return of the fund. This can be measured by taking account of the market conditions.

Compound Annual Growth Rate measures the returns from investment in mutual funds that have a holding period spanning one year.


This is the best way to measure average returns. This can be used for mutual funds online for a specific mutual fund scheme. The basic information such as the form of scheme, investment time, and sum needs to be placed in.

When asked to measure it displays the average returns on the mutual fund of 1 week – 5 years. This is measured from the time of investment.

This scheme’s average return offer is 15% over the past 10 years.