How Mutual Fund Returns are Calculated
The projected maturity amount is calculated by adjusting the expected annual return by the fund's expense ratio:
For **Lumpsum** investments, the standard compound growth formula is used:
For **SIP (Systematic Investment Plan)**, the formula is:
Where:
- P = Monthly investment amount
- i = Monthly net return rate (R / 12 / 100)
- n = Total number of months (Years × 12)
Annual Investment Growth Projections
| Year | Opening Balance | Contributions | Estimated Gains | Closing Balance |
|---|
Frequently Asked Questions
The expense ratio reflects the yearly percentage fee charged by the fund managers to run the scheme. A higher expense ratio means more money is taken from your investment returns, which can significantly compound over 10 to 20 years to reduce your final corpus compared to direct, low-expense plans.
Direct mutual funds do not involve third-party brokers or agents, meaning they carry no distributor commissions. This results in a much lower expense ratio (often 0.5% to 1.5% lower) than regular plans, saving you substantial money over your investment lifetime.