“The patterns repeat, though the details never do.”
—Howard Marks, American investor and co-founder of Oaktree Capital Management
Investors always like to analyse different mutual funds on various parameters before making an investment decision. Two key factors they look at are the potential for return promised by the scheme and the risk profile. While investors can look at the past performance of a fund to analyse the first factor, they need a tool to measure the volatility of a fund. A popular metric used for this purpose is called beta.
Extended Internal Rate Of Return (XIRR) and Compound Annual Growth Rate (CAGR) are two important metrics most investors consider while reviewing the performance of their mutual fund investments. Although both metrics are crucial to track performance, they are used in different scenarios. Hence, for any investor, it becomes essential to understand these metrics to track their portfolio performance accurately.
Now that I have your attention with that clickbait headline, let’s get down to the truth!
If you are planning to invest in mutual funds, then just knowing about a scheme isn’t enough. Whether you are an experienced investor or a beginner, it is important for you to know the various terms and metrics used to measure fund performance. Among the various terms used, trailing returns and rolling returns assess how well a mutual fund has performed over time.
Fixed income funds have delivered strong returns over the past two years as inflation declined sharply from the post-pandemic surge of 2022–23. This disinflationary impulse enabled central banks to pivot decisively towards monetary easing, with 211 and 189 policy rate cuts recorded by global central banks in 2024 and 2025, respectively, well above the post-GFC peak of 181 cuts in 2009 (Source: Bloomberg).
When interest rates rise, existing bonds become less valuable and most debt fund NAVs fall. When rates fall, those same bonds are worth more and debt fund NAVs typically rise. Equity funds, on the other hand, feel the impact through valuations and earnings expectations: higher interest rates compress P/E multiples and raise discount rates; lower rates do the opposite.
Liquidity as the New Driver of Market Dynamics
Gold is often praised as a protection against inflation, but it’s important to remember that correlation is not causation. Throughout my career, I have observed that gold offers reasonable protection against inflation. It is not a perfect hedge, but it is better than most alternatives for those who wish to protect themselves from inflation risk.
