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Rohan Saha
Founder - Burn Inves... • 23d
Many people don't seem to understand one basic thing sometimes mutual fund (MF) returns appear higher than the returns from our individual stock trades. While looking at this, people often forget a very simple point: when we deposit money into a demat account, that money is not invested right away. To understand this with an example: if I deposit ₹10,000 and only use ₹2,000 to buy stocks, then my returns will be based only on that ₹2,000 not the whole ₹10,000. But in a mutual fund, returns (or losses) are calculated on the full ₹10,000 that was invested. That's why calculating returns based on total capital isn’t always a good idea. If you really want to calculate returns, do it based on the capital actually used that will give you a more accurate picture of how much you've really earned.
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