How to accurately measure returns of ALL your past & present Mutual Fund investments

Key takeaways

• The REAL historical overall returns of your portfolio is the equivalent of an exam report card
• But most tools provide returns on your CURRENT investments (i.e. funds with non zero balances) but miss accounting for all the funds you’ve bought & redeemed or fully exited in the past
• Not being able to account for returns including ALL funds bought & sold in the past could lead you to a significantly inaccurate view of your investing returns over time and thereby cause you to miss important investing goals like funding child’s education or retirement by many years
• Kuvera is an app that helps you get a comprehensive view of returns from ALL your past & present investments by way of a feature that it calls ALL-TIME returns
• Kuvera also has other highly valuable features such as enabling buying or switching to zero commission (DIRECT) plans of mutual funds and the ability to estimate capital gains tax on a transaction in advance of you making a transaction?

You can’t improve on what you aren’t measuring accurately

Imagine a scenario like this. Your child doesn’t study much, spends a lot of time watching TV, social media and studies for tests and exams at the last minute. Despite that, he / she has consistently been bringing home report cards from school for many years that show that he / she is getting between 90% and 95% overall every year. Since your child is doing well with relatively little studies you don’t insist that he / she spends more time on studies. Then, when it comes to his / her 12th standard board exam, he / she comes home with between 70% & 75%. Clearly you would be in for a rude shock in such a scenario and one you definitely do not want to face. You are quite likely to feel very cheated by the school concerned for misleading you all these years and providing you and your child with a false sense of confidence.

In the world of investing, the overall returns of your portfolio is the equivalent of your marks card. And unfortunately, I would hazard a guess that a very large percentage of investors are consistently being shown misleading investment returns report cards (not intentionally but rather due to tool limitations) that are similar to the one in the fictitious school report card analogy above.

The consequences of consistently looking at an inaccurate investment returns report is that you could fail to meet crucial financial goals like your child’s college fees or your retirement.

This is why it is important to make sure that you know what the REAL returns on your investments are.

The critical difficulty or catch in measuring our Mutual Fund Investment returns

Here’s what typically happens with most of us investing in mutual funds. We buy a fund, hold it for say 3, 4 or 5 years then exit out of it for one reason or another (mostly due to performance) and switch to another fund. This repeats again and again. Over a typical 15 to 25 year period of investing in mutual funds, most investors will go through dozens of changes in funds.

Let's illustrate with an example

In the above example, the investor puts in Rs. 100 into Fund A, holds it for 5 years and when the value is Rs. 125 moves that into Fund B, holds that for 3 years and when the value is 160 moves that into Fund C. At the time of measuring returns, Fund C has been held for 2 years.

In a typical scenario, with most tools, you would only be able to see the 11.8% returns that Fund C has given you over the past 2 years and you would probably feel very happy seeing such a good return.

However, in reality the question you need to be asking is "What is the return I have got given that I invested Rs. 100 (in Fund A) ten years ago and it is now Rs. 200?(in Fund C)". And the answer to that is that over 10 years your average "all-time" investment return after switching across 3 funds has been 7.17%.

Many tools will accurately tell you the returns on your CURRENTLY HELD SET OF INVESTMENTS i.e. the ones with some (non zero) balance in them. (In the example above it will tell you the returns from your investments in Fund C) Now here’s the catch & the problem. Most of these tools will not factor in the returns on funds that you bought & completely sold or exited. And if this is not accounted for, then the returns being shown on the tool are not showing you’re your real historical investment returns.

I myself have been misled (not intentionally but rather due to tool limitations) by such investment report cards for a long time in the past .

The solution: Kuvera app to the rescue

This is where a brilliant app like Kuvera comes in very handy. There are 2 types of returns shown on Kuvera. CURRENT returns and ALL TIME? returns.

This ALL-TIME return is the equivalent of your final exam report card when it comes to investments and this is what you ideally want to measure and track

Here’s a sample dummy / example screenshot of a fictitious portfolio on Kuvera.

Snapshot of ALL TIME returns

INCLUDES returns from all funds that have been redeemed or exited in the past

Note also that this clearly provides separate ALL-time returns figures for your equity and debt investments which I think is another very valuable set of data points to help us make changes to and improve our investment portfolio.

Sampling of CURRENT returns

For the same sample portfolio above, the CURRENT returns (i.e. EXCLUDING redeemed or zero balance folios) were as follows:

Difference between current and all time returns

As is demonstrated amply well by the above example, the returns showing in a tool that only captures current returns could be well off the mark. ?

If you’d like to get an accurate picture of how your own mutual fund investments have performed, you could follow the steps below on Kuvera: The steps on how to do that are below.

How to create an account, upload and measure your investment returns in Kuvera

Step 1: Create an account on Kuvera

Step 2: Import all your mutual funds into Kuvera

Step 3: View your portfolio analytics

Step 4: View your returns in the section titled “Portfolio XIRR”.

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Note: Kuvera can also has 3 other excellent features that provide substantial value

a)?????? You can buy zero commission plans of mutual funds (called DIRECT plans)

b)????? You can switch from regular (commission based) to DIRECT (zero commission) plans

c)?????? You can get an estimate of capital gains tax on a transaction BEFORE making a transaction. Most tools provide the capital gains tax only after you have done the transaction

Lastly, I would love to hear from you if there are other apps or tools you know of that also provide a similar accurate All-Time returns figures and also if there are other flaws you have noticed with returns calculations in other tools or apps.

Disclaimer: I am not a financial advisor. My articles are meant for people who are not savvy or well versed with personal finance and investing and find it difficult to grasp all the jargon typically used when discussing such topics. I hope to be able to demystify investing and make it as simple as possible for everyone. I am merely someone like millions of other common folk who have been investing in Mutual Funds. I’ve invested in Mutual funds for approx. 22 years. I’ve also been a diligent student of the subject of investing over the past 22 years. In these articles I’m merely sharing my experience & learning from that journey in the hope that it might help others in some way. Neither am I in any way directly or indirectly claiming to be a hot shot investor who has generated exceptional or above average returns during my investment journey. However, I am quite confident that even if all you do is learn from my mistakes and don’t repeat them, you will benefit greatly. Please ensure that you consult a financial advisor before taking any decisions or actions concerning your personal finances or investments.