In my previous posts about mutual funds, I discussed why it is the best alternative to time deposits and how could you invest in it. As a new investor on mutual funds, there are many questions you might need to know but there are few facts that you can get from website of companies offering these kind of investments.
Some readers of this blog are commenting and asking me to give them a sample computation on how to calculate the profits gained from investing in MF. In this regard, I would like to show you a sample calculation in this post.
Before studying the calculation below, you should first learn some basic terms in mutual funds. You should know what is NAVPS, sales load, redemption fee, and other important words related to investing. Take note that this computation is applicable only for mutual funds with zero redemption fee.
Most of the investment companies have zero redemption fee after six months of mutual fund investment has elapsed. When you redeem your funds earlier than 6 months, there is a corresponding redemption fee that you need to pay which will be deducted from your fund receivables.
How to Compute Profit Gain from Mutual Fund Investments
In order to start with the computation, we should have some data that we can use. Take note that these data are just assumption and some will be coming from the latest information posted in First Metro Asset Management, Inc. (FAMI) website. For example, you invested P20,000 in FAMI equity fund in May 2011 with the following information about your investment:
Amount of Money Used for Investment (A): P20,000
NAVPS when MF was Bought (B): P3.2489 per share
Sales load (S): 2% of (A) = 0.02*20,000 = 400 = P400
Total Amount of Money to buy MF (T): 20,000-400 = P19,600
Number of Shares that You can Bought: T/B = 19,600/3.2489 = 6,032 shares
From the data above, you can see that the total number of shares you bought from the P20,000 investment is 6,032 shares of equity MF. To compute your profit gain, you should know the latest NAVPS of the fund. In case of FAMI equity fund, the NAVPS on January 27, 2012 is 3.9279.
Profit Gain = 6,032*(3.9279-3.2489) = 6,032*0.679 = P4,095.73
Profit Gain = 4,095.73
If you add this number (4,095.73) to the amount of money (19,600) that you use to buy the mutual fund, you will get 23,695.73. This should be the same with the computation below.
Net Amount of Money in MF = 6,032 (number of shares)*3.9279 (price per share) = P23,693.08
The difference between the two numbers is due to rounding up of numbers but basically they should be the same.Your total profit gain in investing in equity FAMI mutual fund is 4,095.73 based on the computation above. In addition, the net amount of your money in MF is P23,693.08.
The calculation above is for information purposes only. It is not meant to give you investing advice but encourages you to invest in mutual fund at your own risk. Your own decision should prevail if you want to invest in mutual funds. The return or profit is not guaranteed by the investment company. In addition, I have no working relationship with FAMI nor compensated to use their company in this post.