Investing in Mutual Funds is a popular choice for many looking to grow their wealth, but understanding how returns are calculated can be a bit confusing. Unlike traditional savings or fixed deposits, the returns from Mutual Funds are not fixed and can vary based on market performance. In this guide, we will break down the process of calculating returns in Mutual Funds, making it easy for you to understand how your investments are performing.

1. Understanding Net Asset Value (NAV)

The Net Asset Value (NAV) of a Mutual Fund is crucial in determining the value of your investment. NAV represents the per-unit value of the fund’s assets after deducting liabilities. It is calculated daily based on the closing market prices of the securities in the fund’s portfolio. Simply put, NAV reflects the market value of the fund’s holdings on a per-unit basis.