Mutual fund performance

When you see a mutual fund’s returns, you are seeing its per annum returns.

So, if a mutual fund’s 3-year returns (3Y) is 12%, it means 12% per annum for 3 years.

In case of mutual funds (especially equity mutual funds), returns can be volatile in the short term.

This is why, usually, 1-year returns change a lot more than 3-year returns (and why 3-year returns change more than 5-year returns).

So when the markets move up, the 1-year returns move up more than the 3-year returns, and so on.

The opposite happens when the markets fall.

This is why investors should focus more on the longer-term returns — not just the last 1-year and 3-year returns.