Average Return on Mutual Funds in India – Based on 10Y CAGR

Last Updated on Jan 13, 2025 by Vanessa Sequeira

When evaluating a fund’s performance, one of the most critical metrics investors consider is the average mutual fund returns in India. It serves as a benchmark for understanding how well a fund has performed over time, offering insights into its potential for wealth creation. There are several mutual funds available in the market, with each one consisting of a different portfolio composition, risk and growth prospect. For example, a large-cap mutual fund consists of companies with high market capitalisation and are suitable for investors with low-risk appetite. In contrast, a small-cap mutual fund comprises companies with small market capitalisation and is ideal for investors with high-risk appetite. 

Therefore, finding the right one according to your investment objective and risk appetite would make all the difference. In this blog, using Tickertape Mutual Fund Screener, we have listed the average returns on mutual funds in India across different market capitalisations.

Best-Performing Large-Cap Mutual Funds In India In The Last 10 Yrs

Note: The data is as of 9th January 2024. The highest return mutual funds are sorted according to their 10-yr returns by using Tickertape Mutual Fund Screener.

• Category – Equity > Large Cap Fund
• Plan – Growth
• 3Y CAGR – High
• 5Y CAGR – High
• 10Y CAGR – High (sorted from highest to lowest)

Best-Performing Mid-Cap Mutual Funds In India In The Last 10 Yrs

Note: The data is as of 9th January 2024. The best-performing mid-cap mutual funds are sorted according to their 10-yr returns by using Tickertape Mutual Fund Screener.

• Category – Equity > Mid Cap Fund
• Plan – Growth
• 3Y CAGR – High
• 5Y CAGR – High
• 10Y CAGR – High (sorted from highest to lowest)

Best-Performing Small-Cap Mutual Funds In India In The Last 10 Yrs

Note: The data is as of 9th January 2024. The best-performing small-cap mutual funds are sorted according to their 10-yr returns by using Tickertape Mutual Fund Screener.

• Category – Equity > Small Cap Fund
• Plan – Growth
• 3Y CAGR – High
• 5Y CAGR – High

10Y CAGR – High (sorted from highest to lowest)

Understanding Average Return on Mutual Funds

The average return on mutual funds represents the mean percentage gain or loss generated by the fund over a specific period. This metric provides investors with an indication of the fund’s historical performance, aiding in comparisons across different funds and investment strategies. Mutual fund returns in India can vary significantly based on factors such as the fund’s asset allocation, market capitalisation focus (e.g., large-cap, mid-cap, small-cap), and prevailing market conditions.

Types of Returns in Mutual Funds

Understanding the different types of returns in mutual funds is essential for evaluating their performance accurately. Here are the key types of mutual fund returns in India:

1. Absolute Returns: Absolute return refers to the total gain or loss on an investment over a specified period, expressed as a percentage. This metric does not account for the time period and is commonly used for short-term investments. For example, if you invested ₹1,00,000 in a mutual fund and it grew to ₹1,10,000 in a year, the absolute return would be 10%.
2. Annualised Returns
   Annualised returns show the average return a mutual fund generates annually over a specific period. It is particularly useful for comparing the performance of mutual funds over different time horizons. This is often seen in data for the best-performing mutual funds of the last 20 years in India.
3. Compound Annual Growth Rate (CAGR)
   CAGR is a widely used metric to measure the average annual growth of an investment, considering the effect of compounding. For instance, when evaluating average return in mutual fund, CAGR helps investors understand how their investment has grown consistently over time.
4. Trailing Returns
   Trailing returns measure the performance of a mutual fund over a fixed time frame, such as 1 year, 3 years, or 5 years, ending at the current date. These returns are commonly used to assess mutual fund average return India and compare funds with similar investment objectives.
5. Rolling Returns
   Rolling returns provide a better picture of a fund’s performance across multiple time periods by calculating returns over overlapping intervals. This approach ensures that temporary market fluctuations don’t overly influence the fund’s performance analysis.
6. XIRR (Extended Internal Rate of Return)
   XIRR is used to calculate returns on investments made at different times, such as in a Systematic Investment Plan (SIP). It’s a helpful metric for understanding mutual funds average returns India for investors with staggered contributions.

How Are Average Returns on Mutual Funds Calculated?

Calculating the average return involves determining the fund’s performance over a set timeframe, commonly expressed as the Compound Annual Growth Rate (CAGR). CAGR reflects the mean annual growth rate of an investment over a specified period, assuming the profits are reinvested at the end of each year. The formula for CAGR is:

CAGR = [(Ending Value / Beginning Value) ^ (1 / Number of Years)] – 1

This calculation accounts for the effects of compounding, providing a more accurate measure of a fund’s performance over time compared to simple arithmetic averages.

How to Invest in Best-Performing Mutual Funds

Investing in top-performing mutual funds requires a strategic approach:

1. Identify High-Performing Funds: Utilise tools like the Tickertape Mutual Fund Screener to filter funds based on historical performance metrics such as 3-year, 5-year, and 10-year CAGRs. 
2. Assess Fund Suitability: Examine the best equity mutual funds’ investment objectives, risk profile, and portfolio composition to ensure alignment with your financial goals and risk tolerance. Different funds cater to varying investor needs; for example, large-cap funds typically offer more stability, while small-cap funds may provide higher growth potential with increased volatility.
3. Consider Investment Horizon: Align your investment choices with your time horizon. Equity mutual funds are generally more suitable for long-term goals due to their potential for higher returns over extended periods, despite short-term market fluctuations.
4. Diversify Your Portfolio: Avoid concentrating investments in a single fund or sector. Diversification across various asset classes and fund categories can mitigate risks and enhance the potential for stable mutual funds average returns.
5. Monitor Performance Regularly: Keep track of your investments and review fund performance periodically. Be prepared to make adjustments in response to significant changes in fund performance or shifts in your financial objectives.

By following these steps and staying informed about the types of returns in mutual funds, investors can make more educated decisions to achieve their financial goals.

Factors To Consider Before Investing In These Mutual Funds

Before investing in any mutual fund, it is important to check certain important factors like 

• Investment goal: It is always important to invest according to your goal. Get a list of mutual funds and keep an eye on their performance. For example, if you are close to retirement, you may choose a balanced fund that invests in a mix of bonds and stocks. 
• Investment horizon: Before investing, consider your investment horizon. If your investment goal is short, check for short-term funds that you can liquidate in a few years. If you have a long-term investment goal, go for long-term funds. Overall, ensure the fund duration matches your investment goal duration. 
• Risk appetite: This is essential to keep in mind while investing. Highest return mutual funds have different options. Invest according to your risk tolerance, or your investment can go to waste. 
• Returns: An investment is considered good if it gives you more than you invested. This includes the fees and other costs associated while investing. 
• Fees: Mutual fund companies or brokers charge a fee based on the investment amount. Go through the fees charged by your broker before investing. 

Taxation On Equity Mutual Funds As Per The 2024 Budget

Understanding the latest tax regulations on equity mutual funds is essential for making informed investment decisions. The Union Budget 2024 has introduced significant changes to the taxation of equity mutual funds, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules:

Short-Term Capital Gains (STCG)

If you hold equity mutual funds for less than a year, the gains from these investments are classified as short-term capital gains. According to the new budget, these gains are now taxed at a rate of 20%, which has been increased from the previous rate of 15%.

Long-Term Capital Gains (LTCG)

For equity mutual funds held for more than a year, the gains are considered long-term capital gains. The key points to note under the new budget are:

• Tax-Free Limit: Gains up to Rs. 1.25 lakh in a financial year remain tax-free. This limit has been increased from the previous threshold of Rs. 1 lakh.
• Tax Rate: Any gains above Rs. 1.25 lakh are taxed at a flat rate of 12.5%. It was previously taxed at 10%.
• Indexation: It’s important to note that the benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for all asset classes, including equity mutual funds.

Indexation is a method used to adjust the purchase price of an asset (like property or gold) for inflation over the years. This adjusted price is then used to calculate capital gains. Previously, long-term capital gains from selling property, gold, or other unlisted assets were taxed at 20%, but you could use indexation to reduce your taxable profit. The new rule simplifies the tax structure by setting a flat 12.5% tax rate for all long-term capital gains. However, it removes the indexation benefit.

Summary

No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.

Conclusion 

Investments are the way to make wealth. But before investing, consider your risk appetite and investment goal. Make sure you have a good knowledge of mutual fund returns in india before investing. You can check Tickertape Mutual Fund Screener to get a fund’s key metrics. You can mutual fund average return in 10 years and find the best fund that suits you. Happy Investing!

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Anjali Chourasiya

I am a finance enthusiast who loves exploring the world of money through my lens. I’ve been dedicated to building systems that work and curating content that helps people learn.

As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!

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