Equity mutual fund returns are based on the Net Asset Value (NAV) of the fund, not on the percentage return already displayed before you joined.
The key point is this:
The 25.2% return shown in April is a historical return — it belongs to investors who were already invested before April.
Your friend Ade does not automatically inherit that 25.2% gain.
Here is the practical breakdown.
Example
January 1
You invested ₦100,000 into an equity fund.
Assume the fund’s NAV was:
NAV = ₦10 per unit
So your units are:
By April
The fund has performed well.
Its NAV rises from ₦10 to ₦12.52.
That increase represents:
So your investment value becomes:
Your gain:
₦25,200 profit
25.2% return
Now Ade Invests in April
Ade also puts in ₦100,000.
But now the NAV is already ₦12.52.
So Ade gets fewer units:
Ade is buying at the new higher price.
He does not receive the earlier 25.2% growth because that growth has already happened.
What Happens Next?
Ade only earns returns based on what happens after he invested.
For example:
If NAV rises further from ₦12.52 to ₦13.50:
Then Ade earns about 7.83%.
His investment becomes:
So his profit is around ₦7,824.
Simple Analogy
Think of equity funds like buying land.
You bought land when it was cheap.
By April the land price had already risen 25.2%.
Ade is buying after the increase.
Ade only benefits from future appreciation after his purchase.
Important Concept
When you see:
“1 year return = 25.2%”
It means:
“If you invested one year ago, your money would have grown by 25.2%.”
It does not mean every new investor immediately receives 25.2%.
One More Important Thing
Equity fund returns are usually:
Compounded
Based on:
stock price appreciation
dividends received
reinvestment
fund expenses
That is why NAV changes daily.
So every investor’s actual return depends on:
Entry date
Exit date
Amount invested
Market performance during their holding period