Demystifying Mutual Fund Returns: All you Need to Know 

Together these metrics help you understand not just “how much” did a fund or an investment earned but also “how consistently” did it perform. 

When you invest in a Mutual Fund, the first question that comes to your mind is, “How much returns will I get by investing in this fund?”  

We have all done that while shortlisting Mutual Funds, right? There’s nothing to be ashamed about it. 

But here’s the thing, each one of us’ definition of return varies as there are more than just one return type. Trailing Returns, Rolling Returns, SIP Returns, Calendar Returns – if these terms make you confused, do not worry as you are not alone. 

In this blog, we break down each type of returns one by one in Plain English, with simple examples, so the next time you look at a fund fact sheet, you’ll understand what the terms mean. So let’s get into it right away. 

Quick Summary:-

Mutual Fund Returns can be measured in many ways, each offering a unique perspective on performance. Absolute Returns show simple growth, Annual / Calendar Returns highlight year by year gains or losses. Point to Point Returns provides you annualised returns between two dates, while Trailing Returns are similar but the returns are considered from latest date. Rolling Returns helps beat the bias of cherry-picking returns providing a consistent measure of returns across multiple cycles. Total Returns consider not just the price growth but also the dividend and interest income to give you a complete picture. XIRR/SIP Returns capture all cashflows of investment / portfolio to measure overall returns.  

Absolute Returns – The Straightforward One 

Absolute Returns are no nonsense and the simplest way to measure of how much your money has grown. 

Absolute Return (%) = (Current Value−Initial ValueInitial Value)×100(Current Value−Initial ValueInitial Value)×100

Example: You invest ₹1,00,000 in a mutual fund. If let’s say after 3 years if the investment has grown to ₹1,25,000.  

Your absolute return is,  (125000−100000100000)×100(125000−100000100000)×100

= 25% 

It is easy to calculate and understand, but it doesn’t factor in the time to tell you how long did it take you to earn that return.  

Annual Returns – The Yearly Snapshot 

Annual Returns or Calendar Returns simply show you how much a specific fund has gained or lost in a specific year. For example, a fund you invested in grew 10% in 2022, 8% in 2023, and fell -2% in 2024. While the fund is up 1% Year-to-Date as of now.  

Calendar Returns helps you track the performance of your fund year by year. But. It may look inconsistent because markets don’t give the same return every year. 

Point to Point Annualised Returns – The Time Adjusted View 

Point to Point Returns calculate the annualised returns of a specific investment or scheme between two dates. So let’s say you want to calculate the annualised returns that you earned in a scheme between 27^th Sep 2022 to 26^th Sep 2025, you would take the final investment value, the invested amount in the scheme, and then use the CAGR formula, to arrive at your annualised returns.  

So, in this case if your ₹1,00,000 investment has grown to ₹1,40,000 in the same period, your returns would be,  

𝐶𝐴𝐺𝑅=(1,40,0001,00,000)13−1 = 11.87%CAGR=1,40,0001,00,00013−1 = 11.87%

Point to Point Annualised Returns help you smoothen out the ups and downs of the fund returns and show you the average yearly growth. One thing that you should consider is that Point-to-Point returns are calculated accurately when the time period is in full years.  

For example, the duration between two dates should be complete years like 1 Year, 3 Year, 5 Year and not 1 Year 1 Month, 3 Year 5 Days, or 5 Year 8 Months. This will help you gain accurate understanding of the annual returns that you have earned on your investments. 

Trailing Returns 

Trailing Returns are similar to point-to-point returns in the sense that trailing returns look back from today’s date and show the annualised returns for periods like 1 Year, 3 Year, 5 Years, etc. For example, if as on date 30^th Sep 2025, you want to understand the 3Y Trailing Returns of a fund, you would calculate the Point-to-Point returns between 1^st Oct 2022 – 30^th Sep 2025. For 5Y Trailing Returns, you would consider from 1^st Oct 2020.   

Trailing returns can often be misleading as the reference period is always the latest date (today) and therefore the returns change every day.  

Rolling Returns – The Dependable One 

Rolling Returns are the solution for Trailing Returns or Point to Point Returns that can often pose of problem of “cherry picking dates”. Instead of looking at only one cycle or period of returns, rolling returns tries to capture the median or average returns across multiple periods.  

For example, A 3 Year Rolling Returns for a Fund is calculated by tracking the 3 Year Returns of the specific fund across various periods. Let’s understand through a table. 

The average of these returns would then be arrived at to arrive at the 3Y Rolling Returns. The Median of these returns can also be calculated to understand the performance of the fund across various phases of the markets.  

Some investors also calculate Rolling Returns by calculating the period returns day by day (as compared to monthly in the example above) to increase the instances of returns for granular calculation. 

Rolling Returns help capture the returns of an investment across cycles and hence it offers an all-season approach. It is like ranking a student’s performance across all exams and not just one lucky test.  

Total Returns – The Complete Picture 

Total Returns considers not just the price growth but also the dividend income, and the interest income. This is important because many investors ignore the dividend or interest income when calculating their overall returns. 

For example, you invested ₹1,00,000 in a Mutual Fund Scheme which grew to ₹1,10,000 at the end of a year. But in the middle of the year, the fund had also declared a dividend of ₹1.5 per unit which for you was ₹600 (assuming 400 units at ₹250). So, your total return would be 10,600 / 1,00,000 = 10.6%. 

Total Returns should be the one that you should calculate if the investment that you are invested in provides you returns in multiple ways. 

XIRR Returns – The Master Metric

 XIRR or SIP Returns as they are referred now captures the cashflows as well as the time factor in your investments. XIRR Returns are best for investors who have multiple cashflows in and out of an investment like through SIP or SWP.  

Even for investors who want to compare consolidated returns of their portfolio where the cashflows are non-linear, XIRR offers them the ability to gain a broad perspective of the returns that they have earned. 

Each outflow (investment or charges) is recorded as a debit, each inflow (dividend, interest) and current value is recorded as a positive value. XIRR is then calculated to understand the returns earned on these investments. 

Putting it all Together 

Let’s quickly compare all these return types in a snapshot. 

Final Thoughts 

Understanding and reviewing how Mutual Funds have performed is like a full body checkup. A single parameter like your body weight doesn’t tell the full story. You also need to understand the fat composition, bone density, sugar levels, and other indicators to get a complete picture.  

Similarly for mutual funds, just checking the trailing returns or absolute returns won’t help. Looking at rolling returns for consistent performance, calendar returns to understand volatility, SIP Returns to understand performance across phases is more helpful. 

Relying on a single number / metric won’t help you. But if you understand what each of these metrics mean, you’ll know exactly how to look at it and gauge them. 

Disclaimer: The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been suggested or offered based upon the information provided herein, due care has been taken to endeavor that the facts are accurate and reasonable as on date. The information placed on the presentation is for informational purposes only and does not constitute as an offer to sell or buy a security. The Company reserves the right to make modifications and alterations to the content available on the presentation. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. The EduFund platform & the website is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. An affiliate of the Company, i.e. Edubillions Tech Private Limited is registered with AMFI as mutual fund distributor bearing the registration number ARN258733. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market. 

About the author

Niraj Satnalika

Head Of Research,EduFund

Dr. Niraj is a finance professional with 12+ years of experience and is part of the founding team at EduFund. He’s worked with Goldman Sachs, CRISIL and Sakal Media in roles spanning investment management, research and leadership. With a PhD in Finance from IIT Bombay, he brings deep expertise in valuation, governance and education planning. When he’s not teaching or writing, you’ll find him cooking or going on long drives.