DEFINITION of 'Growth Of 10K'
A graph that shows the change in value of an initial $10,000 investment over a period of time. The "growth of 10,000" chart is typically used to compare the returns from various investments, either against each other or against an underlying benchmark. The returns shown in such a chart include reinvestment of dividends and capital gains, but exclude fees and sales charges. Growth of 10,000 charts are used extensively by mutual funds as part of their marketing material.
BREAKING DOWN 'Growth Of 10K'
Most mutual fund companies have interactive charts on their websites that enable investors to visually compare the performance of various funds over a period of time. If the investor wishes to compare performance of two or more funds since their inception, the starting point should go back far enough to include the launch of the oldest fund.
While the growth of 10,000 chart is a useful tool for comparing investment performance, it has some limitations. Since it excludes fund management fees and other charges such as sales and redemption expenses, the growth shown is overstated, and the actual returns that would accrue to an investor would be lower than those shown.
As well, while an investor should consider the effect of volatility when making an investment decision, the chart is of limited use in this regard. As an example, $10,000 invested in equity Fund A may have grown to $15,000 over five years, while equity Fund B may have increased to $16,000 over the same period but with significantly higher volatility. A conservative investor may prefer Fund A to Fund B because of its lower volatility, but would need additional performance data beyond that provided by the growth of 10,000 chart to make an informed decision.