What Are Historical Mutual Funds Returns?

The historical return of any financial entity describes its past performance. Experts keep track of this data to analyse and predict the future returns of a financial asset. Historical or past returns also help you determine the variables causing the growth or fall of a fund, bond, stock, or security.

If you are keen on buying mutual funds (MFs), you shouldn’t do so without analysing the fund’s previous performance or history. This is one of the best ways to zero in on the funds that can provide you with high returns at low or moderate risk.

How to understand MF historical returns?

To understand mutual fund historical returns, you must analyse the fund’s past performance over various time periods (1 year, 3 years, 5 years, and 10 years) to assess consistency and growth trends. Compare these returns with the fund’s benchmark index to determine how well the fund has performed compared to the broader market.

It's also important to look at annualised returns to determine the total gain or loss over a specific period. Additionally, you must also consider the impact of dividends and reinvestment on the overall returns to get a clearer picture of how the fund has performed over time.

How to calculate the historical value or return of MFs?

Before reading the formula for calculating this figure, you should know the timeline considered for tracking a fund's past performance. Relevant authorities typically record an MF's historical or previous return from the start of a calendar year to the end of the same year. For instance, you can determine an MF's past performance beginning from January 1 to December 31 of a particular year.

However, basing mutual funds’ historical returns on only a single year's data is grossly insufficient, as it does not accurately capture market fluctuations. Therefore, analysts compile historical annual returns over many years to observe a trend in a particular MF. This information provides them with the previous average returns of an MF.

Here is how you calculate a single year’s historical or past return:

You cannot figure out the average past return of an MF before computing the return for individual years. 

So, you begin by subtracting the latest price with the oldest price of an MF and then dividing the answer with the oldest MF price.

For instance, suppose MF ABC’s closing price on 31 December 2019 was Rs. 2500. The same scheme’s closing price in December 2020 stands at Rs. 3200. Then,

Historical or previous return for ABC = 3200 – 2500 = 700, which you will further divide by the oldest available price of ABC.

700/ 2500 = 0.28 or 28%

The historical or past return for MF ABC comes out to 28%.

Additional Read: What Are the Average Returns on Mutual Funds?

How to calculate the average historical value or returns on MFs?

Once you’ve calculated year-wise historical returns as shown in the section above, taking out their average is relatively easy. Provided below is the representational data for MF ABC for the last 5 years.

- December 31st 2016 – 20%

- December 31st 2017 – 22%

- December 31st 2018 – 24%

- December 31st 2019 – 25%

- December 31st 2020 – 28%

To find out the average historical value of MF ABC, you simply need to add all the 5 values listed above and divide them by 5.

Average historical value of ABC = (20% + 22% + 24% + 25% + 28%) / 5 = 23.8%

Additional Read: How are Mutual Funds Returns Calculated?

Where to check a mutual fund performance history?

You can check a mutual fund's performance history from three reliable sources:

- Individual AMC websites: Visit the AMC website to find detailed historical data, including past returns, NAV trends, and performance comparisons.

- Association of Mutual Funds of India (AMFI) website: AMFI provides a comprehensive NAV history page that offers official and up-to-date information on mutual fund NAVs across various time frames.

- Tata Capital Moneyfy: Tata Capital Moneyfy aggregates data from multiple sources, offering an easy way to compare and analyze mutual fund performance histories.

Frequently asked questions

1. What is the average return of mutual funds in 5 years?

The average return of mutual funds over five years can vary significantly depending on the type of fund (equity, debt, hybrid, etc.) and market conditions. Equity mutual funds typically offer higher returns, while debt funds generally offer lower, more stable returns.

2. Which MF is best for 10 years?

For a 10-year investment horizon, equity mutual funds, particularly diversified equity funds or index funds, are often recommended due to their potential for higher long-term growth. However, it's important to consider your financial goals and risk appetite before making any investment decisions.

3. Which type of MF gives the highest return?

Equity mutual funds typically offer the highest returns. However, they also come with higher risk.