Past Performance: What Must Be Shown, and the Standard Warning
Rules fix how a scheme's past performance is shown, so that schemes can be compared on the same footing. This lesson covers the required figures, the benchmarks shown beside them, what advertisements may not contain, and why a past return says nothing certain about the future.
The figures that must be shown
A scheme more than a year old shows its compound annual growth rate (CAGR) for each of the 1, 3 and 5 year periods it has completed, and since inception. Beside the percentages it shows point-to-point returns on a standard investment of ₹10,000, so that a reader can see what they mean in rupees on a like-for-like basis.
CAGR is the steady yearly rate that would take the starting value to the ending value: (end ÷ start)^(1/years) − 1. A scheme between 6 and 12 months old shows simple annualised growth instead, and a scheme under 6 months old shows no performance (overnight, liquid and money-market schemes may show simple annualised yields for 7, 15 and 30 days).
What appears beside the figures
Performance is shown alongside the scheme's own benchmark and an additional benchmark. The additional benchmark is a broad equity index for equity schemes, a 1-year Treasury bill index for debt schemes of up to one year's duration, and a 10-year government security index for other debt schemes.
The disclosure states whether the plan shown is regular or direct, since the two have different expense ratios and NAVs. The riskometer accompanies the figures, and the performance of the fund manager's other schemes is disclosed as well.
What an advertisement may not do
No advertisement may offer an indicative yield or return, and none may use celebrities, testimonials or rankings. Each carries the standard warning that mutual fund investments are subject to market risks.
The reason is the same throughout. A past return describes what has already happened. Past performance may or may not be sustained in future and is not a guarantee, and a market-linked scheme can also lose value.
Rules at a glance
Reading a performance table (illustrative)
A scheme launched four years ago shows CAGR for 1 year, for 3 years and since inception. It shows no 5-year figure, because it has not completed five years. Each figure appears beside the benchmark's and the additional benchmark's figure for the same period, with the value ₹10,000 would have reached.
A second scheme, launched eight months ago, shows only simple annualised growth. A third, launched four months ago, shows no performance. None of the three tables says what any of the schemes will do next.
Point-to-point return, CAGR and simple annualised growth (illustrative figures)
- A standard investment of ₹10,000 in an illustrative scheme stood at ₹13,310 after 3 years. Point-to-point, the gain is 13,310 − 10,000 = ₹3,310, or 33.1%.
- CAGR = (13,310 ÷ 10,000)^(1/3) − 1 = 1.331^(1/3) − 1 = 1.10 − 1 = 10% a year.
- Check: 10,000 × 1.10 × 1.10 × 1.10 = ₹13,310.
- Dividing 33.1% by 3 gives 11.03%, which is not the CAGR: it ignores compounding and overstates the yearly rate.
- A different scheme is 8 months old and has grown by 6%. Scaled to a year without compounding, that is 6% × 12 ÷ 8 = 9% simple annualised growth. No CAGR is shown for it.
Result. ₹10,000 becoming ₹13,310 in 3 years is a CAGR of 10%. The 8-month scheme shows 9% simple annualised growth. Both describe the past only.
Key points
- A scheme more than a year old shows CAGR for 1, 3 and 5 years and since inception, plus point-to-point returns on ₹10,000.
- Schemes 6 to 12 months old show simple annualised growth; schemes under 6 months old show no performance.
- An additional benchmark is shown beside the scheme's own, and the plan (regular or direct) is stated.
- No advertisement may offer an indicative yield or return, or use celebrities, testimonials or rankings.
- Past performance may or may not be sustained in future and is not a guarantee.
Common misunderstandings
- A past CAGR is not a rate the scheme will go on earning: past performance may or may not be sustained, and the scheme can lose value.
- A scheme under a year old does not show CAGR: it shows simple annualised growth from 6 months, and nothing before that apart from the 7, 15 and 30-day yields that overnight, liquid and money-market schemes may show.
- A ranking or a testimonial in a mutual fund advertisement is not permitted: neither is an indicative return.
Questions people ask
Why are returns also shown on ₹10,000?
Using the same standard amount for every scheme lets a reader see what the percentages mean in rupees on a like-for-like basis.
What is the additional benchmark for a debt scheme?
A 1-year Treasury bill index for debt schemes of up to one year's duration, and a 10-year government security index for other debt schemes.
What does a 5-year CAGR say about the next five years?
Nothing certain. It describes what has already happened. Past performance may or may not be sustained in future and is not a guarantee.
What this lesson relies on
- SEBI Master Circular for Mutual Funds, 20 March 2026 (performance disclosure and advertisement code; additional benchmark, paragraph 14.2.4)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.