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Fwd: Proper evaluation of mutual funds - take care of these un-noticed charges


Use this site to know the various parameters not seen i most websites showing details of mutual funds:  https://www.valueresearchonline.com/

Pay attention to 'Expense' or 'Expense Ratio (%)' and 'Exit Load' of a mutual fund also. The above website compares the mutual funds in a category on the basis of 'expense' also. 

For example, generally, Franklin templeton group of mutual funds has more expense charges as compare to others. If we don't include it in calculation of net return, we will do wrong expectations.

However, the NAV of a mutual fund is calculated after deducting expenses so the returns which are being calculated are also net of expenses (this is as per reply to my mail, by a mutual fund brokerage firm) The expenses take a toll in the long run. Mutual funds give big returns only if you invest for a long horizon using SIP to invest and SWP to withdraw. search for 'mutual fund SWP' in the search box on my blog for understanding them.

The difference between absolute and annualised returns : 

This can be explained with an example.

 Suppose an investment of Rs 1,000 was made five years ago and it has grown to Rs 1,300 today, then the absolute gain would be Rs 300, i.e., a 30 per cent growth. This 30 per cent return is absolute return.
A 30 per cent return on investment would normally qualify as good but for the fact that it was realised over five years. Now if you want to know how much the investment has grown on a yearly basis, you will have to take a look at the annualised returns, which will tell you the return a fund turned in each of the years on an average basis during this five-year period, provided the gains were re-invested every year. In this case, the annualised returns works out to 5.38 per cent. Assuming that the money has been growing at a constant rate, the investment of Rs 1,000 would have grown to Rs 1,053.80 by the end of first year. In the second year, it would have been Rs 1,110.50 (by adding 5.38 per cent of Rs 1,053.80) and so on till the fifth year when it appreciates to Rs 1,300.

See the sample calculation chart on this website to see the impact of Expense ratio on your investment in a mutual fund:


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