# How to Calculate Investment Returns on Mutual Funds

by Susan Reynolds

A mutual fund's investment return is the amount of money by which it has decreased or increased in value. Its most recent annual return is of particular significance to a potential investor. This is calculated over the period of one year. For example, if you invest \$5,000 and realize an annual return of 8 percent, you made a profit of \$400. Most investors look at a mutual fund's past performance as a predictor of future performance, but it's not always accurate.

1. Write down the amount of money you have invested in a mutual fund and include any distributions you have reinvested into it. For example, if you invested \$5,000 in a mutual fund and reinvested a \$500 distribution, write down \$5,500.

2. Subtract your original investment from the number you wrote down in Step 1. For example, \$5,500 - \$5,000 = \$500.

3. Divide the number you got in Step 2 by your initial investment amount. For example, \$500 / \$5,000 = 0.1.

4. Multiply the answer you got in Step 3 by 100 to get the percentage. For example, 0.1 X 100 = 10 percent. This is your return on your investment.

#### Warning

• Transaction fees and commissions can reduce your return by a few percentage points.

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