The Truth about Balanced Mutual Funds’ Historical Returns

Many investors consider a balanced mutual fund’s historical returns to be its most important indicator of success. While the calculation of/and research into these returns is a key factor in the analysis of a mutual fund, it is important to remember that these are do not provide incontrovertible evidence of the overall consistency of a particular balanced fund.

Basic Definition of Historical Terms

A return on a balanced mutual fund shows how much that fund has either made or lost during a particular period of time, and are most often averaged out to an annual percentage. If, for example, someone invests $1000 in a company and at the end of the year that investment has reached $1100, then the return would be $100, or 10%. However, this does not take into account inflation rates and fluctuations over the year, so the actual return will be a bit lower. Records of these annual earnings and losses over time are referred to as historical returns.

Effects on Returns

Balanced fund returns are driven by the market, so when the economy dips, investors should not expect high returns (or any returns, in some cases) on their mutual funds. Additionally, even if the market is stable, it takes time for these returns to add up to a visible amount, particularly since transaction costs decrease overall returns. Furthermore, compounding (accumulating all gains and losses over a particular period) can effectively increase the historical return percentage on an investment.


There is a specific formula for calculating a return on a balanced mutual fund. This percentage is computed by compiling the net asset value (NAV) at the beginning and end of a year, as well as the amount of money allocated to different investors. These distributions are added to the year-end NAV, and then the starting NAV is subtracted from that. The final figure is then divided by the starting NAV. So, the return on a fund that started with $20, distributed $5, and ended up with $30 would look like this: (30+5-20)/20=.75, or 75%.

Yahoo Finance

Those who do not feel prepared to estimate their own returns via mathematical calculations can consult the Yahoo Finance tool, which allows investors to check on historical return rates and daily statistics. By following the “historical prices” link and choosing the particular mutual fund and year of interest, it is possible to see closing prices and dividend numbers dating back over 20 years.


While these calculations, balanced mutual funds’ historical returns can be incredibly helpful in getting a sense of a fund’s potential. These calculations can also be misleading. In fact, many financial analysts caution against relying too heavily on these statistics and numbers, which are often exploited as marketing devices for particular companies. That is, while a certain fund might be on trend due to its particularly high past returns in recent years, that does not necessarily mean investors can rely on these numbers in the future. In fact, these periods of success have often proven to be short-lived.

As a result, while investors can calculate the returns on particular funds and conduct research into balanced mutual funds’ historical returns, they should also remember to consult the investment practices and characteristics of the funds under consideration. While history is important, it is not always indicative of future performance.