If you just started your investment or planning to start investing on Mutual Funds and you want to know how much your money can earn, here’s a simple computation that will help you realize how valuable time is in your investment.
Let’s meet the two financial terms you should know.
1. NAVPS (Net Asset Value per Share): The price of shares that changes on a daily basis. This figure represents the market values of the investment assets the mutual fund company owns.
2. Number of Shares: This can be determined based on the amount you invested in divided by the price of NAVPS
Amount of investment / NAVPS today = Number of shares you bought.
Example: You have an initial investment of Php 10,000.00
1. Today’s NAVPS is Php 3.6056
2. Calculate the number of Shares:
Php 10,000 / Php 3.6056 = 2,773 is your number of shares.
Let’s assume at the end of the year, the *NAVPS’ price climbs to Php 4.6200
Year End NAVPS: P4.6200
Current NAVPS: P3.6056
Difference in NAVPS prices: P4.6200 – P3.6056 = P1.0144
Number of Shares Owned = 2,773
**Profit = P1.0144 x 2,773 = P2,812.93
Of course, the *NAVPS we project before the year ends is very ideal but can happen. So if you have Php 10,000 that you are planning to add into your savings for a longer term, think again. With this simple computation, you can easily see how you can maximize the earnings of your money.
Let’s apply this to my self. If I had an initial investment of Php100,000.00 when I started on April 6, 2011.
Apr 06, 2011 NAVPS: 2.6781
May 26, 2014 NAVPS: 3.6056
Difference in NAVPS prices: P3.6056 – P2.6781 = P0.9275
Number of Shares: 37,340
**Profit: Php 0.9275 x 37,340 = Php 34,632.85
Now all I can do is dream. But I already learned my lesson. =)
Now… ask yourself, can your money earn that from your savings account at the end of the year or just three years after?
*NAVPS is changing every day, it could have it’s high and low so it’s highly advisable that you keep your money for a long period of time.
**Profit – maybe subject for tax or fund manager fee of the mutual fund company you chose. Make sure that you know these stuff from the company that you want to invest in.