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How do you calculate the annual return of a mutual fund?

I understand roughly how mutual funds work, and I'm trying to decide which mutual funds to invest in, but to prove to myself that I understand them, I'm trying to work out the exact math for calculating their exact return in dollars from the fund's public performance criteria. A funds prospectus provides tons of metrics, but I can't find any clear description for how most of these effect the return.

For example, say I invested $1000 in mutual fund ABC, with a NAV per share of $10, a yield of 3.17%, an up-front sales charge of 5%, a 12b1 fee of 0.3%, typical dividend of $0.5 twice a year, and a 5 year average return of 3%. If I invested in that fund for a year, and assuming its return was similar to its 5 year average and the NAV ended at $15/share, how would I calculate my likely overall return?

The formula I think is:

initial_investment = 1000 # $
initial_nav = 10 # $/share
final_nav = 10.5 # $/share
fee_12b1 = 0.03 # percent
sales_charge = 0.05 # percent
typical_biannual_dividend = 0.5 # $

amount_invested = (investment - investment*sales_charge - investment*fee_12b1) = $920
shares = amount_invested/initial_nav = 92
cashout_value = shares*typical_biannual_dividend*2 + shares*final_nav = $1058

Is this correct? Are there other fees or expenses I'm not taking into account? Could this be done more simply by multiplying the return with my initial investment (e.g. $1000 * 1.03)?

  • Is that sales charge up-front, deferred or a level load? The yield and dividend don't work together that way. The $10 NAV with a 3.17% yield would mean that $.3170 is distributed annually or if you want to claim that $1 total dividend the yield is 10%. You also need to understand that all distributions are assumed to be reinvested so that the 3% total return assumes any distribution is buying more shares at each point. – JB King Dec 13 '15 at 6:08
  • @JBKing, Sorry, that's up-front sales charge. – Cerin Dec 13 '15 at 17:50
  • @JBKing, So then I'm correct that the return takes into account all these calculations? – Cerin Dec 13 '15 at 17:52
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The best would be take the initial investment and final return and calculate the difference. Ofcourse if there are non-periodic dividends, then it complicates the math. You would have to then calculate the returns accommodating this.

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