NAV = Net Asset Value
Suppose you own 8 shares of a fund with a NAV of $10 a share, equal to a $80 investment, and the fund declares a $2 capital gain. You now have $96.
The NAV falls to less than $10/share -- the amount of the distribution -- and your $16 capital gain (8 shares times $2) is reinvested according to your prior instructions (hopefully you told them that when you signed up), which buys you more shares. Now you own more shares of a fund with a lesser NAV, but still equal to $96.
If you look at your fund, it appears to have gone down in value from $10 - wrong! You have more shares, the value has increased indirectly by getting you more shares.
NAV changes do not equal your RETURN !
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.