<\/p>\n\n\n\n
You invested Rs. 75,000 in a mutual fund, and now your statement says it\u2019s worth Rs. 95,000. Clearly, your money has grown, but by how much? As you try to calculate it, you come across terms like CAGR or relative return, all of which sound a bit technical. All you want is a simple way to know how much your money has grown. That\u2019s what absolute return shows.<\/p>\n\n\n\n
But what is absolute return in a mutual fund<\/strong>? Let\u2019s break it down.<\/p>\n\n\n\n Absolute return is the simplest way of checking how much your investment has grown or declined over a given period. It doesn\u2019t consider the performance of the stock market or other funds. It just tells you the percentage gain or loss on your money.<\/p>\n\n\n\n For example, if your mutual funds of Rs. 75,000 have grown into Rs. 95,000, you have made Rs. 20,000 profits, or 27%. But how did we arrive at this 27%? Read on to the following sections to know more.<\/p>\n\n\n\n The math behind absolute return is simple. Here\u2019s the formula:<\/p>\n\n\n\n Absolute return = (Final value \u2013 Initial value) \u00f7 Initial value \u00d7 100<\/p>\n\n\n\n Let\u2019s put this into an example:<\/p>\n\n\n\n Now, applying the formula (you can even use your phone calculator!), we get:<\/p>\n\n\n\n (Rs. 95,000 \u2013 Rs. 75,000) \u00f7 75,000 \u00d7 100 = 27%<\/p>\n\n\n\n That means your investment has earned a 27% absolute return.<\/p>\n\n\n\n Now that you understand what absolute return is <\/strong>and how to calculate it, you should also know why it matters. This percentage:<\/p>\n\n\n\n Understanding why absolute return matters is only the first step. Knowing when to use it helps you make the most of your investments.<\/p>\n\n\n\n Absolute return works best when:<\/p>\n\n\n\nUnderstanding absolute returns<\/strong><\/h2>\n\n\n\n
How to calculate absolute return?<\/strong><\/h2>\n\n\n\n
\n
Why does absolute return matter?<\/strong><\/h2>\n\n\n\n
\n
When should you use absolute return?<\/strong><\/h2>\n\n\n\n