Why 3 years return in mutual funds is higher than 5 year returns? (2024)

FAQs

Why is 3 year return higher than 5 years in mutual funds? ›

Because in 3 years we may have been in a bull or a bear market which will determine the returns. Hence returns can be fluctuating in a big time. If u consider above 5 year returns the market would have already digested the ups and downs and that return can be more like a reality than the shorter timeframe.

The return over three years, expressed in yearly figures. For example a fund that has returned 30% over three years has a 3 year annualised return of 10%.

Quant Small Cap Fund

The small-cap mutual fund has given a 41.98% return in the last three years. The fund is benchmarked against NIFTY Smallcap 250 Total Return Index, which has given 31.16% return in the same period.

A 5-year annualized return, also known as 5-year CAGR (Compound Annual Growth Rate), is the average annual growth rate of an investment over a 5-year period, considering the effects of compounding.

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

It is crucial to review historical performance and consider factors like risk before investing. Is a 10% return on a mutual fund good? A 10% return on a mutual fund can be considered good, especially if it aligns with the investor's financial goals and risk tolerance.

Typically, the ideal holding period for an equity mutual fund is considered anywhere between a minimum of 3-5 years. But data shows that only investments in 3% of the units continued for more than 5 years.

It completely depends on the mutual fund you invest in. Some mutual funds, do have a lock-in period. ELSS mutual funds have a lock-in period of 3 years. Many other mutual funds have lock-in periods too.

How long really is long-term investing? Generally, any asset you hold for over five years is considered a long-term investment and you usually distribute your money across a range of assets to build a diversified investment portfolio.

How long should you have a mutual fund? ›

Mutual funds have sales charges, and that can take a big bite out of your return in the short run. To mitigate the impact of these charges, an investment horizon of at least five years is ideal.

The task, then, is to take these three basic non-cash assets — domestic stocks, international stocks, and bonds — decide how much of each to hold (your asset allocation). Choose where to hold each of these asset classes, and finally choose a mutual fund to use for each asset class.

The recent performance surge has lifted the category scorecard of healthcare funds, with an average return of 59% over a one-year period, a compounded annual growth rate (CAGR) of 18% over a three-year period, and 23% CAGR over a five-year period. This is as per the latest data from Value Research.

There are eight large cap mutual funds which have delivered over 40 percent return in the past one year. These include Quant Large Cap Fund, Bank of India Bluechip Fund, JM Large Cap Fund and Nippon India Large Cap Fund, among others.

How long really is long-term investing? Generally, any asset you hold for over five years is considered a long-term investment and you usually distribute your money across a range of assets to build a diversified investment portfolio.

The rule of 8-4-3 when it comes to compounding indicates a style of investment that accelerates growth with time. Initially, a corpus doubles within 8 years through an average annual return of 12% subsequently another doubling happens for the same period after another 4 years following its initial setting up.