155) What are the Components of a Unit Trust NAV?
a) Stocks or Shares
b) Bonds
c) Money Market instruments
Equity funds will have all 3 asset types.
Bond funds will have bond and money market instruments.
Money Market funds will have money market instruments only.
Stocks
For Stocks, the value changes during the market open times. They are traded among different investors. One investor will want to buy and another will want to sell. The buy and sell transaction happens when both agreed on a certain price.
If the selling price is higher than the buying price, then there is Capital Gain.
If selling price is lower price than buying price, then there is Capital Loss.
Stocks also may receive Dividends as the income. Dividends are paid out as part of profit given to investors. Some stocks pay dividend a few times in a year. Upon receiving dividends, the Unit Trust fund asset value increases.
Bonds
For Bonds, they are also traded by bond buyers and sellers in the bond market. Similarly like stocks, bond prices also changes depending on market conditions. There is also Capital Gain or Loss depending on buying and selling prices.
Bond buyers receive Coupon Payment as interests. The coupon payments are calculated and accrued daily. The Unit Trust fund asset value increases daily.
Money Market
For Money Market, there is no change to the value. For an easy understanding about Money Market, just think like Fixed Deposit. The value is same in the beginning and at the end. There will be interest paid for the money placed in the financial institutions.
Money Market depositors receive Interests. The interests are calculated and accrued daily. The Unit Trust fund asset value increases daily.
Total Asset Value
The Total Assets in the funds are calculated on the total current market values of all the stocks, bonds and money market instruments held by the fund.
Capital Gain/Loss
Capital Gain or Loss depends on the differences between the buying and selling of the assets. If selling price is higher than buying price, then there is Capital Gain. The Gains and Losses of all transactions are added to calculate the net difference.
Total Income
Total Income are calculated from the total dividends, coupon payments and interest received.
Total Expenses
In Unit Trusts, there are expenses incurred while managing the funds. The expenses are Management fee, Trustee's fee, Audit fee, Tax Agent's fee, Brokerage fees, administrative fees and expenses. The Expenses reduce the Total Asset Value.
Total NAV
Total Net Asset Value is calculated by adding up all the Assets value, Capital Gains or Losses, Dividends, Coupon Payments & Interests received and minus the Total Expenses.
The Total NAV is calculated on daily basis to get the NAV of the day.
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