Mutual fund returns shown by investment platforms and newspapers mislead you.

Why should you think twice?

[A thread] 🧵

“XXX mutual fund has delivered astounding returns of 80% in the last one year.”

You may have read thousands of such headlines and claims online.

They tell you only half the story.

Mostly, investment platforms and newspapers report trailing returns.

To calculate trailing returns, you have to pick a mutual fund’s NAV from two specific dates.

And calculate how much the NAV has increased during the period.

Example:

NAV of ‘ABC’ fund on 1st Oct 18 = INR 100
NAV of ‘ABC’ fund on 30th Sept 21 = INR 175

3-year CAGR = 20.51%

But there’s a problem with trailing returns.

You have to calculate it point to point.

If you change the dates, the returns may fluctuate.