Every investor hopes to put his money into an investment scheme with the hope of getting returns out of it. For that reason, the rate of return is among the top factors that one should consider when investing. Mutual funds are a type of investment that are characterized by unique rates of returns. They are popular with many investors because they bring with them some attractive returns, and the investor is not directly involved in their management.
The returns on these investments help one to determine whether the value of the investment has increased or decreased over any given period of time. They are calculated in percentages, and in most cases this is done on an annual basis. Calculation of the percentages is not as hard, and in many instances, the percentage will be given to the investor by the mutual fund manager.
Mutual funds returns are normally calculated on a compound average annual return rate basis. This is to say that in addition to earning a return to your original investment, you also earn a return on the returns themselves. However, the figures take into account any expenses that have been incurred in the process. These include sales commissions, capital gains (or losses) and dividends, all of which are expressed in percentages.
It is worth noting that the returns one gets are greatly influenced by a number of other factors that an investor should carefully analyze before investing. These factors include but are not limited to the funds charges, fees and expenses, taxes that are payable at times, age and size of the fund as well as the risk factors involved. It is only wise for an investor to carefully look at these factors and how they will positively or negatively affect the returns.
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