Let's assume that Mr. Gupta has purchased Mutual Fund units worth Rs. 10,000 at an NAV of Rs. 10 per unit on February 1. The Entry Load on the Mutual Fund was 2%. On September 15, he sold all the units at an NAV of Rs 20. The exit load was 0.5%.

His growth/ returns is calculated as under:

1. Calculation of Applicable NAV and No. of units purchased:

(a) Amount of Investment = Rs. 10,000
(b) Market NAV = Rs. 10
(c) Entry Load = 2% = Rs. 0.20
(d) Applicable NAV (Purchase Price) = (b) + (c) = Rs. 10.20
(e) Actual Units Purchased = (a) / (d) = 980.392 units

2. Calculation of NAV at the time of Sale

(a) NAV at the time of Sale = Rs 20
(b) Exit Load = 0.5% or Rs.0.10
(c) Applicable NAV = (a) – (b) = Rs. 19.90

3. Returns/Growth on Mutual Funds

(a) Applicable NAV at the time of Redemption = Rs. 19.90
(b) Applicable NAV at the time of Purchase = Rs. 10.20
(c) Growth/ Returns on Investment = {(a) – (b)/(b) * 100} = 95.30 %

Points to Remember

›  Do not speculate: Always evaluate risk-taking capacity.

›  Do not chase returns: Because what goes up must come down.

›  Do not put all eggs in one basket: Diversification reduces the risk.

› Do not stop working on Mutual Funds: Continuous evaluation of    funds is a must.

›  Do not time the market: Every time is good for investments.

›  Mutual Funds are subject to market risks and there is no assurance that     the fund objective will be achieved.

›  NAVs fluctuate depending on forces affecting the Capital market.

›  Past performance may or may not be sustained in the future.

›  Returns are neither guaranteed nor assured.