Ledgerline

How to read a fund's past returns

Absolute vs annualised returns, trailing returns, worst falls and consistency: what past numbers can and can't tell you about a mutual fund.

Updated 5 Oct 2026

Past returns are the first thing everyone looks at and the easiest to misread. Here’s how to read them properly.

Absolute vs annualised

  • Absolute return is the total change: a fund that went from ₹100 to ₹150 returned 50%.
  • Annualised return (CAGR) spreads that over the years: 50% over 3 years is about 14.5% a year, while 50% over 5 years is about 8.4% a year.

Always compare annualised numbers over the same period. The fund explorer shows returns over one year annualised for exactly this reason.

Trailing returns depend on the end date

A “5-year return” is measured back from today. If today happens to sit after a big rally, every fund looks great; after a crash, they all look poor. One period tells you little. Look at 1, 3, 5 and 10 years together, and remember the market’s mood on the end date colours all of them.

Look at the worst fall, not just the best year

The worst fall (maximum drawdown) is the deepest drop from a previous high. It tells you what owning the fund actually felt like. A small-cap fund with great 10-year returns may have fallen 50–60% along the way. Ask yourself honestly whether you’d have held on, or sold at the bottom. If you’d have sold, the long-term return was never yours.

Compare like with like

  • Compare a fund with others in the same category and with its index. A mid-cap fund beating a large-cap fund in a mid-cap rally isn’t skill.
  • Compare direct with direct and growth with growth. Regular plans and IDCW options show lower returns for reasons that aren’t about the fund’s investing.
  • Check the fund’s age. A fund launched two years ago has no 5-year record, and a great short record may be luck.

What past returns can’t tell you

Last five years’ top fund is often not the next five years’ top fund. Managers change, strategies get crowded, and fund size grows. Use past data to understand how a fund behaves (how volatile it is, how deep it falls, whether it keeps up with its index) rather than to predict what it will earn.

Educational only, not advice for your situation.