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Mutual Fund Value
Old 12-29-2010, 07:20 PM   #1
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Mutual Fund Value

Have been reading about mutual funds recently, the number to track is apparently the NAV. If I look at historical performance, it's probably the NAV I am looking at, but I heard that mutual funds frequently give additional shares back to the owner which is not reflected in the NAV. Is this true and does this mean that I am actually seeing worse historical performances on mutual funds than are actually occurring?
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Old 12-29-2010, 07:53 PM   #2
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No, the number to track is NOT the NAV, the thing to track is the total return which assumes reinvested dividends (which the NAV does not take into account). See the charts at morningstar.com to get the correct multi-year performance of various mutual funds.

If you are only looking at the NAV, you are indeed seeing worse historical perfomances on mutual funds than has actually occurred, and there is no way to predict how far off without knowing all distributions paid by the fund over time. So, ignore the NAV. Only look at performance charts that add the distributions to the accumulated fund value over time.

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Old 12-29-2010, 07:58 PM   #3
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Quote:
Originally Posted by inquisitive View Post
Have been reading about mutual funds recently, the number to track is apparently the NAV. If I look at historical performance, it's probably the NAV I am looking at, but I heard that mutual funds frequently give additional shares back to the owner which is not reflected in the NAV. Is this true and does this mean that I am actually seeing worse historical performances on mutual funds than are actually occurring?
the NAV at the close of the day (less expenses) is what you get if you redeem your shares

when the fund does a distribution ... the NAV will drop by the amount of the distribution as these funds are being paid out (most investors select the reinvestment option and additional shares are purchased with the money)

your total return calculation would need to include the distribution for an accurate return amount ... the particular funds web site will certainly take this into account

if you are using a third party chart or return calculation ... you need to check to see if the chart takes into account the distribution
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Old 12-30-2010, 09:24 AM   #4
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When calculating returns, I use the "adj. close" price column on the far right of the historical prices section of Yahoo Finance for a security. It incorporates distributions and gives you the total return.

Here's an example:

VGTSX Historical Prices | VANGUARD TOTAL INTERNATIONAL ST Stock - Yahoo! Finance
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Old 12-30-2010, 08:03 PM   #5
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got it, thanks for the clarification
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