How To Track Mutual Fund Performance

Mutual funds are a conglomerate of stocks, bonds, and other forms of investments.

When investing, many people put their money into mutual funds because they tend to be less risky than other types of investments.  They’re popular because they provide diversification, and are easily liquefied if necessary.

Mutual fund holders obviously want to know if the shares of their funds are increasing in value.  Calculating the Net Asset Value (NAV) is one way of telling how a mutual fund has been performing.  The NAV is the amount that one share of the company's stock is worth.  NAV is calculated by dividing the fund's total assets by the number of existing shares.  An example of this is a mutual fund that has a value of $100,000,000 and has had 10,000,000 shares purchased. This fund would have a NAV of $10.00 per share.  Looking at a mutual fund’s NAV from one year to the next will give the stock holder an idea whether the stock is gaining or losing money over time.

The yield of the fund is also an important aspect to be taken into consideration when tracking the performance of a fund.  The yield is the percentage number of the NAV that the fund is providing for income.  In order to calculate yield you would look at the value of the NAV and then the amount of money the stock is paying for income.  This is usually written in percentage form.  For example, a yield of a fund with an NAV of $35.00 and an income payment of $3.00 would have a yield value of 8.57%

In addition, Total Return can be used to gauge mutual fund performance.  This is  the amount of the selling price plus distributions, divided by the original cost of the stock.  An example of this would be stock that is selling for $35,000 and bought for $15,100 with dividends of  $300, you would add the value of the stock ($35.000 +$300.00) and then divide by the original cost ($15,100.00).  The answer 2.337 would be changed into percentage form.  The total return on this stock would be 133.77%.  To analyze the performance of this stock even further, the stock holder would want to find out the Compound Annual Growth Rate (CAGR).  The CAGR is found by multiplying the total return by the amount of years the stock was held.  A return of this amount over a short period of time would be the sign of a good performing stock.  If this stock performed this way over a long period, it may not be the best choice.

To get pertinent information on stocks, check the newspaper and the web sites of the various mutual fund companies.


Share this article!

Follow us!

Find more helpful articles: