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Tip of the Day Index Funds are Your Friend

Index Funds are Your Friend - Every stock market or stock exchange offers indexed funds and these index funds are more beneficial to you as a new investor as they...

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Mutual Fund Average Return

Calculating your mutual fund average return can help you figure out how your investment is performing for you. Mutual fund average return shows how much your investment has changed in a certain amount of time. This is often calculated on an annual basis. This will tell you how the mutual fund is doing over a period of 12 months. For example, if you put $1,000 into a mutual fund, you will determine what it is worth a year later. Therefore, if your investment totals $1,050 12 months later, that means the annual return on your money is 5 per cent. u made an extra 50 dollars from your investment in less than a year. You may actually be making less than that when you take the rate of inflation into account over that same amount of time.

You also have to consider any other costs that could reduce the mutual fund average return. Sales commissions or management fees have to be deducted from the current value of your investment.

Another calculation will help you understand you investments is the compound average annual return. This means you re-invest any money you made on the original investment. Mutual funds usually add in all capital gains and dividends when they quote the compound average annual return. This is a calculation of returns over a period of a number of years. For example, a certain fund could claim a 7.6 per cent 3-year compound average return. However, the fund did not have returns of 7.6 per cent in each of those years. Often the fund will have lost money one year, made a lot of money the next, and a good average return in the third year. The return would only apply to people invested in the fund in the exact period used in the calculation. However, the compound average annual return shows you how wealth can grow over time. Obviously, the current state of the stock market will affect your returns. If the average market is down 8 per cent, then you won't likely see returns of 20 per cent.

Tax implications are important when you are looking at average returns. A recent study found that mutual fund rankings turned out very differently when the impact of taxes was calculated. You will want to discuss taxes with your broker, especially if you are in a higher income bracket.

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Proof Of Concept – (Proof-of-concept) Referring to the types and applicability, reliability or evidence, verification, confirmation and corroboration, even substantiation, or resilience of data, fact etc. Also called POC, showing its usefulness and applications, features and possibilities, allowing to an extent no to low risk exposure and exploration, prospecting if...

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