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Rohan Saha

Founder - Burn Inves...ย โ€ขย 3m

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 โ‚น10,000 and only use โ‚น2,000 to buy stocks, then my returns will be based only on that โ‚น2,000 not the whole โ‚น10,000. But in a mutual fund, returns (or losses) are calculated on the full โ‚น10,000 that was invested. That's why calculating returns based on total capital isnโ€™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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