Mutual Fund Rate Of Return Calculator

ROR Formula:

\[ ROR = \frac{(Final\ Value - Initial\ Value + Distributions)}{Initial\ Value} \times 100 \]

Rate of Return (ROR):

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1. What is Mutual Fund Rate of Return?

The Mutual Fund Rate of Return (ROR) measures the percentage gain or loss on a mutual fund investment over a specific period, taking into account both capital appreciation and distributions such as dividends and capital gains.

2. How Does the Calculator Work?

The calculator uses the ROR formula:

\[ ROR = \frac{(Final\ Value - Initial\ Value + Distributions)}{Initial\ Value} \times 100 \]

Where:

\( Final\ Value \) — Current value of the investment
\( Initial\ Value \) — Original investment amount
\( Distributions \) — Dividends, interest, and capital gains distributed

Explanation: This formula calculates the total return percentage by considering both the change in investment value and any distributions received during the holding period.

3. Importance of ROR Calculation

Details: Calculating ROR helps investors evaluate investment performance, compare different mutual funds, and make informed decisions about portfolio allocation and investment strategies.

4. Using the Calculator

Tips: Enter the initial investment value, current value, and total distributions received. All values must be positive numbers in the same currency unit.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between ROR and annualized return?
A: ROR shows total return over the entire period, while annualized return calculates the average yearly return, accounting for compounding effects.

Q2: Should I include reinvested distributions?
A: Yes, distributions should be included whether taken as cash or reinvested, as they represent part of the total return.

Q3: What is a good ROR for mutual funds?
A: This varies by market conditions and fund type, but generally, ROR should exceed inflation and benchmark indices to be considered good performance.

Q4: How does ROR account for time period?
A: This basic ROR calculation doesn't account for time. For comparing investments of different durations, annualized return is more appropriate.

Q5: Can ROR be negative?
A: Yes, if the final value plus distributions is less than the initial investment, ROR will be negative, indicating a loss.