Business

5 metrics you should consider while evaluating fund performance

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1. Point-to-Point Returns or Absolute Returns

This metric measures the percentage change in investment value from the beginning to the end of a specific period.

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2. Compound Annual Growth Rate (CAGR)

It allows investors to compare the historical returns of different investments or portfolios and helps in understanding long-term growth trends. 

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3. Extended Internal Rate of Return (XIRR)

XIRR takes into account the timing and amount of each cash flow, providing a more accurate picture of an investment's return.

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4. Rolling Returns

Rolling returns measures the average annual returns over various periods, indicating the consistency of performance. 

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5. Benchmark index

A benchmark is a standard index that represents the mutual fund category. Comparing fund's performance against benchmark provides insights into how well fund manager has performed.

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