Net worth: the basis for calculating returns

This course is reproduced from Morningstar, and some changes have been made by Futu.

01 quickly understand the net value of fund units

The net asset value of the fund unit is the price of the fund unit share. It is calculated by adding up the value of stocks, bonds or other marketable securities (including cash) in the portfolio, deducting the related expenses, and dividing the balance by the total share.

For example, for a fund with a 500000 share, its assets include 9 million of stocks and 1 million of cash, and its net asset value per unit should be 20 yuan (excluding deductions for related fees).

02 it is different from the stock price

There are four differences between the net value of the fund and the stock price.

First, stock prices change from time to time during the trading hours of each day. On the other hand, the net worth of the fund is calculated after the end of trading hours every day, and there is only one net worth per day. Investors buy closed-end funds according to the timely price transactions, but buy open-end funds follow the unknown price method, buy on the same day, the final transaction price is the net value calculated at the end of the day.

The purchase of shares is usually calculated on the basis of the number of shares. Such as buying 100 shares of China Merchants Bank and 100 shares of Bank of Communications. For small investors with limited liquidity, high share prices are an obstacle. The purchase of securities investment funds is calculated on the basis of the amount of investment. Generally speaking, fund companies do not mind selling fund shares calculated in decimal terms. As long as investors can pay the minimum amount of investment, they can get the corresponding share.

If you invest 1250 yuan in a fund with a minimum investment of 500 yuan and a net worth of 1.50 yuan, you actually get 833.33 shares of the fund.

Second, the number of shares in circulation is usually fixed, and listed companies can change the number of current shares by issuing additional shares or buying back shares in the market, and the change in the number of shares will affect the price of the stock. The share of open-end funds is usually not fixed, and the daily share change depends on the purchase and redemption of investors. However, the increase or decrease of the share usually does not affect the change in the net value of the fund, but the change in the value of the securities in the portfolio and the sales of the fund will.

Third, the price of the stock depends on the price that people are willing to pay. Investors can decide whether the stock price is overvalued or undervalued according to the profitability and cash flow of listed companies, and further guide investment decisions. The price of the fund is based on the value of the portfolio and has little to do with how much investors are willing to pay.

Fourth, the price change of a stock can basically measure the performance of a stock. However, the distribution of income or income to the holders of the fund will reduce the net unit value of the fund. Unless these dividends are taken into account, the true performance of the fund will be greatly underestimated. To accurately measure the performance of funds, investors need to examine their total returns, that is, the capital gains and dividends of integrated fund positions.

The significance of net asset value per unit is to let you know the latest daily value of your investment.Net worth is the basis for calculating returns, but a single day's net asset value does not show the performance of the fund.In order to compare the performance of different funds, factors such as risk-adjusted return, investment strategy, investment team and cost should be taken into account.