Mutual Fund

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe and open-ended investment company in the UK. A mutual fund is an investment vehicle where multiple investors come together and pool their funds. This pooled money is then invested by the fund manager across various asset classes including equity, debt, gold, and other securities to generate returns.

Look at Long-Term Returns on Mutual Funds

Although past performance is no guarantee of future results, historical returns can provide reasonable expectations about the growth of an investment over time.

For example, in 2021, mutual funds in seven broad categories averaged an annual return of 11.54% (see the table below), well above the average annual return over the 15 years prior to that. U.S. large-cap stock funds were the best performing category of the seven, while short-term bond funds were the worst. You can also look at performance since inception. For example, the Vanguard 500 Index Investor had a 10-year return of 15.46% as of Dec. 31, 2021, while its average return since its inception in 2004 as of that same date was 11.66%.12 One of the more reliable gauges of future performance is the average annual return over a past 15-year period. Short-term performance can vary widely, so even looking at a past 10-year period may not capture the full picture for you. For example, the 10-year annualized return of the S&P 500 Index as of Jan. 18, 2022, was about 13.34%.3 But the 15-year annualized return as of that same date was 8.08%.4 Through the end of 2022, a 15-year figure is a more realistic predictor of future performance because it includes the bear market of 2008. Once it's 2023, the bear market of 2008 will no longer be part of the 15-year figure.