Advertisement

-

How to Compute your earnings in Mutual Funds?


Mutual Fund is an alternative investment vehicle to grow your money for your long-term goals. Understanding how it works and knowing its advantages are the first step in investing in mutual funds. Once a person has started his mutual fund account, it is always a basic question, “So, how does one earn in mutual funds?” The answer is simple:

Related Content: What is a Mutual Fund?
Compute your earnings
Compute your earnings
Every time you invest in mutual funds, you will regularly receive a Statement of Account. Depending on your mutual fund company, you will receive it monthly, quarterly or any other regular intervals may it be in hard copy or through email. The Statement of Account or SOA will show your investment data including your account number, date of investment, investment amount, NAVPS or the price per share when you bought it, and your total number of shares bought.
Statement of Account: FAMI Mutual Funds
Statement of Account: FAMI Mutual Funds (edited to hide investor data)
Statement of Account: Soldivo Mutual Funds
Statement of Account: Soldivo Mutual Funds (edited to hide investor data)
Now, to compute your potential earnings let us refer to the sample Statement of Account of Philequity Mutual Fund below:

Statement of Account: Philequity Mutual Fund
The total number of shares bought is 3,330.
The total amount investment is 106,000.
The price as of Dec.12, 2015: 33.776900 pesos per share.
The market value as of Dec.12, 2015 is therefore: 112,477.08 pesos.

To compute your earnings:
Market Value - Total amount invested = Earnings
112, 477.08 - 106,000 = 6,477.08 pesos

Computing the percent earnings:
Earnings / Total amount invested x 100 = percent (%) earnings
6,477.08 / 106,000 x 100 = 6.11%

The data computed however, is just the potential earning of the investor since the earnings are just in paper. Until the investor decides to redeem his mutual fund investment, then that is the time the earnings are materialized. 

Related Content: 9 Advantages of Mutual Funds

There is no perfect time to invest in mutual funds as the market is guaranteed to go up and down. The goal should be to invest for the long term to average the different prices. As seen on the above statement of account, the earnings are not that big since the investor was able to invest at NAVPS or price per share higher than 33. Thus, averaging, the investment below 30 were compensated by the investments above 33. 

Can you lose money in Mutual Funds?  

Assuming that for the next few months the market may not perform very well: 

Assuming the NAVPS will become 29 pesos per share.

Computing:
Total Number of shares x NAVPS = Market Value
3,330 x 29 = 96,570 pesos

Computing Earnings:
Market Value - Total amount invested = Earnings
96,570 - 106,000 = -9,430 pesos

Earnings / Total amount invested x 100 = percent (%) earnings
-9,430  / 106,000 x 100 = -8.90% loss

If the market will not perform very well in the next few months, you can also potentially lose money in the mutual funds. However, as mentioned, the loss is just in paper. As long as your investment is not redeemed, then the loss has not yet materialized. 

However, assuming that you let your investment stay for the long-term. Assuming after 10-20 years, the NAVPS will be 250 pesos per share:

Computing:
Total Number of shares x NAVPS = Market Value
3,330 x 250 = 832,500 pesos
or a whooping 685% growth of investment!

Are you ready to start your investment journey with us and experience a life of FINANCE, BUSINESS and INVESTMENTS? Experience #LifeatIMG. Be a member now! (Click here)

Want FINANCE, BUSINESS and INVESTMENT updates? Make sure to subscribe to our free email newsletter and/or follow our social media accounts.



PS: Do you want to learn and invest in the Stock Market? Let Bro Bo Sanchez be your financial and spiritual mentor. Join us here: --> Truly Rich Club 2.0