Thanks for letting is know, Goutham! Happy learning 🙂

Checking, thanks.

I’ve explained this in detail in the Fundamental chapter, please do check that.

For these specs, you will have to ask the AMC itself. What we get is the end of day NAV.

XIRR we won’t be able to figure out what’s the compounded profit, any case we get to know how our profits in the mutual funds gets reinvested in coin zerodha Application? Example how often and how much is reinvested ?

This looks like black box for me

For SIPs, you can use XIRR returns, a modified version of CAGR.

Yes, I do agree with what you are saying. For a multi year investment, returns has to be measured in terms of growth i.e. CAGR or XIRR.

Thank you for your detailed explanation. However, I respectfully disagree with your approach. Evaluating returns on an annual basis provides a standardized way to compare different investments, regardless of the time period. This is crucial for making informed decisions, especially to avoid prematurely disposing of mutual funds due to perceived low short-term absolute returns.

An annualized rate gives a clearer picture of the investment’s performance and potential, ensuring better alignment with long-term financial goals. Additionally, in conjunction with absolute and XIRR, I will closely monitor medium-term rate variations to make informed decisions on whether to stay invested or dispose of the mutual funds.

Best regards
Bala

These are essentially two different types of return measurement. Lets say you travel from Point A to Point B. If I ask you what was your speed, then there are several ways in which you can answer –

1) You can breakdown the speed for every kilometer you traveled. For example you travelled at 60Kmph from 1st to 2nd KM, 70Kmph from 2nd to 3rd, 50kmph between 3rd to 4th etc – this is like the absolute return.

2) You can give me an average speed – this is like the XIRR

Now when it comes to multi year investments, I’m not really interested in knowing what is the return each year, I’d rather know what is the avg growth rate over these years. This way, I only deal with 1 return and base my investment decision.

But when we are looking at a period less than 1, there is no question of ‘multi year avg growth rate’, as the period under consideration is less than 1. Hence, I’d ok to take the absolute return.

Hope this helps.

“The table above helps us understand the different types of investment and the respective type of return we should calculate. For example, we should calculate the absolute return for a lumpsum investment which is less than one year. Likewise, we should look at the XIRR return for a SIP which is older than a year.”

The above text is copied from your notes on this page. You are advising us to calculate absolute return (not XIRR) for an investment (lumpsum or SIP) less than one year. I just wanted to know the reason behind it. Can you please explain it?
Thanks
Bala

Absolute return is not annualized, Bala. Thats why its called ‘absolute’, to indicate that its all encompassing.