Musiwa asks:
I just opened an investment account with Stanlib Balanced Fund and I am adding money every month to this unit trust fund. I would like to understand how they calculate the returns.
Stanlib retail managing director Bongani Mageba replies:
Unit trusts or collective investment schemes registered with the Financial Services Board have to comply with the Collective Investment Schemes Control Act.
This act dictates the manner in which funds are priced and, ultimately, the environment they are allowed to operate in.
Your investment in a particular unit trust or collective investment scheme is divided into equal parts, known as units. Your investment will purchase units in the relevant fund.
The amount of units you receive depends on two factors: the amount you invest and the value of the fund on the day of the investment.
The value of the underlying investments in the fund is used to calculate the value of each unit purchased – this is called the net asset value and varies according to the market value of the investments in that portfolio. The net asset value of the unit will reflect the price of the share, bond or other instruments in which the investor’s money has been invested, and will therefore change every day based on the underlying value of the shares or bonds in that portfolio.
There is, however, one exception to the varying net-asset-value rule. Money market funds are currently not priced at market value, but rather at a fixed price of R1 per unit. Interest accrues daily and is capitalised monthly.
The Stanlib pricing department is responsible for calculating the net asset value, which is published and advertised every day. As previously explained, market movements on the day could mean the net asset value is different from the previous day.
In reference to your question, the return of any fund is calculated by the growth or decline of the net asset value (price of a unit) over a particular period. The net asset value of this fund at any point in time would thus consist of interest and/or dividends being accrued, and the capital values of the underlying shares, bonds and cash instruments being invested in at varying amounts.
For example, the net asset value of our Stanlib Balanced Fund was published as 725.10c on March 12 2015 and at 729.8c on March 16 2015. If you had invested R7 500 in the fund on March 12, you would have bought 1 034 units (R7 500/725.1c). On March 16, those units would be worth R7 549 (1 034 x 729.8c). This clearly illustrates a positive return over the noted period.
If, for example, your next R7 500 was invested at a net asset value of 730c, then you would have bought 1 027 units (R7 500/730c). You would now have a total of 2 051 units valued at 730c per unit, or R15 050.
In a nutshell, your investment returns are calculated daily based on underlying investments such as shares or bonds.
I just opened an investment account with Stanlib Balanced Fund and I am adding money every month to this unit trust fund. I would like to understand how they calculate the returns.
Stanlib retail managing director Bongani Mageba replies:
Unit trusts or collective investment schemes registered with the Financial Services Board have to comply with the Collective Investment Schemes Control Act.
This act dictates the manner in which funds are priced and, ultimately, the environment they are allowed to operate in.
Your investment in a particular unit trust or collective investment scheme is divided into equal parts, known as units. Your investment will purchase units in the relevant fund.
The amount of units you receive depends on two factors: the amount you invest and the value of the fund on the day of the investment.
The value of the underlying investments in the fund is used to calculate the value of each unit purchased – this is called the net asset value and varies according to the market value of the investments in that portfolio. The net asset value of the unit will reflect the price of the share, bond or other instruments in which the investor’s money has been invested, and will therefore change every day based on the underlying value of the shares or bonds in that portfolio.
There is, however, one exception to the varying net-asset-value rule. Money market funds are currently not priced at market value, but rather at a fixed price of R1 per unit. Interest accrues daily and is capitalised monthly.
The Stanlib pricing department is responsible for calculating the net asset value, which is published and advertised every day. As previously explained, market movements on the day could mean the net asset value is different from the previous day.
In reference to your question, the return of any fund is calculated by the growth or decline of the net asset value (price of a unit) over a particular period. The net asset value of this fund at any point in time would thus consist of interest and/or dividends being accrued, and the capital values of the underlying shares, bonds and cash instruments being invested in at varying amounts.
For example, the net asset value of our Stanlib Balanced Fund was published as 725.10c on March 12 2015 and at 729.8c on March 16 2015. If you had invested R7 500 in the fund on March 12, you would have bought 1 034 units (R7 500/725.1c). On March 16, those units would be worth R7 549 (1 034 x 729.8c). This clearly illustrates a positive return over the noted period.
If, for example, your next R7 500 was invested at a net asset value of 730c, then you would have bought 1 027 units (R7 500/730c). You would now have a total of 2 051 units valued at 730c per unit, or R15 050.
In a nutshell, your investment returns are calculated daily based on underlying investments such as shares or bonds.
