Return is the first consideration when people invest into something because they expect more from their placed money. Mutual fund has been designated to provide investor with the diversified risk of investment because investment manager has calculated the variability of the stock combined inside the mutual fund. The stocks package should not have significant dependencies because if it is happen, the risk will not diversified, one stock goes down then other stock goes down. Investment manager should find the stocks that are least interdependence with various industry type. So once get down on price, the other goes up. So, the loss will be covered by the gain. Gain and loss will be summed and then take the average return.
The highest return for mutual fund doesn’t means its the best mutual fund when we compare with its risk. The best investment is that the investment with highest return with lower risk compare with another high return. We should calculate the average return of mutual fund in a year to find the best mutual fund. Compare the average return of the mutual fund in a period with the average saving rates in banks. The average of the mutual fund return in period divided by the average saving plan rates. Or we can directly mutual fund average return rates minus bank’s savings plan rate divided by the standard deviation of the mutual fund return rate. The mutual fund with the highest result of the calculation is the best mutual fund. We can also directly compare stock exchange listed with the mutual fund return rates. Risk takers are likely to choose the mutual fund rates that is higher than stock exchange rates when it goes up and lower than stock exchange when it goes down. Always under or upper the stock exchange line graph.