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natasha Samani made post

How do MF don't show compounded growth & why is there no best mutual fund?

Answer
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ananya Sing answered.
9 months ago


The term compounding has no meaning other than compound interest. Since mutual funds offer no interest, the notion of compound interest does not apply to them.

Here’s why:
It is important to understand that any market-linked product has a chance to grow or dip significantly above or below the invested amount. This growth has nothing to do with compounding as any gain or loss in the value of mutual funds is not the same throughout the period of investment. When one says “mutual fund has the power of compounding” it simply means that the mutual funds have the potential to earn huge profits in the future.

So, growth benefits shall not be confused with compounding benefits and this is the reason why mutual funds companies never show compounded growth.

What is the best investment?
Any investment that gives more returns and involves the least risk is the best investment for investors. 
There is always a list of best performing mutual funds available in the market. However, that list keeps on changing with time and the best sometimes becomes the worst. This is because returns on mutual funds are dependent on market outcomes; one cannot really predict how that particular investment is going to perform in the future. So there’s no best mutual fund as it is all a matter of portfolio composition and market performance.