A mutual fund's purpose is to provide you returns. Before you decide to invest or after you have invested, the critical criterion you consider is mutual fund returns. However a new entrant to mutual funds must note that mutual fund returns are not assured or guarnteed but are expected returns along a pattern.

But what is mutual fund returns? You could count differently. People who invest in a monthly income plan look at their monthly income cheques ar returns, those who have invested in dividend options of funds are concerned with the dividends that they are receiving from time to time. If you have invested in a growth option of a scheme, then the returns have to be only by way of increase in the NAV -the net asset value -of your units.

In all cases, the mutual fund returns are first reflected in increase in net asset value and thereafter applied to dividends or just kept as it is. So if you are in a dividend paying option whether in a monthly income plan or otherwise, you must consider both the dividend you have received, if any, along with the higher net asset value of the units. In other words the NAV increases have to be adjusted for the dividend payments received.

There is nothing like a general expected rate of returns in mutual funds. Different classes of assets give different ranges of returns. So you can expect a rate of return depending on the type of mutual fund you have invested in and the asset allocation pattern of your scheme into various asset classes. For example a debt fund or an income fund will provide returns in a range which would be at much lower levels than the ranges of returns of equity funds. If you have invested in hybrid funds or balanced funds, the ranges of expected returns would be somewhere in between depending again on asset alocation of your fund.

One thing which every investor comparing across countries must know that in countries like US the returns are much lower and that mutual funds are also not that popular in US because the fund managers are not able to beat the general market index because of the mature markets. However mutual fund returns in India is very attractive and because of the differences between Indian and US markets and the two economies, mutual fund opportunity is unique to India.

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