Please Note: While this example takes into consideration a growing economy such as India and its equity market situation– same concepts are applicable to established markets in North America or Europe who benefit from firm enforcement of regulations and simplified process for investment and transparency.
What would your Net Asset Value be if you had invested Rs.500,000 in ULIP (unit linked insurance with growth-equity focus) or Mutual Funds about five years ago? Yes,….in year 2020, COVID era )
To determine your current Net Asset Value (NAV) from a Rs. 500,000 investment in the equity market in 2020, you need to calculate the total returns earned on your investment over the period, adding it to the initial investment amount; however, without knowing the specific investment strategy and the average annual return achieved, it’s impossible to provide a precise answer; you can use online investment calculators to estimate based on assumed return rates.
Key points to consider:
Market fluctuations:
The equity market has experienced significant ups and downs since 2020, impacting the overall return on your investment.
Investment strategy:
Depending on whether you invested in individual stocks, debt, bonds, or a combination, your returns could vary significantly.
Dividends:
If you reinvested any dividends received, it would further increase your total returns.
How to calculate your NAV:
- Find the total return:
Use online calculators to estimate the average annual return on your investment based on your chosen strategy.
Multiply the initial investment amount (Rs. 500,000) by the calculated total return percentage to get the total returns earned.
- Calculate the current NAV:
Add the total returns calculated to the initial investment amount (Rs. 500,000) to get your current NAV.
Example calculation (assuming a 15% average annual return)
Total return = (Rs. 500,000) * (1.15^5) – Rs. 500,000 = approximately Rs. 11,00,000 (assuming a 5-year holding period)
Current NAV = Rs. 500,000 + Rs. 11,00,000 = Rs. 16,00,000
Important note: This is just a hypothetical example, and your actual NAV may differ based on your specific investment choices and market performance.
Net Asset Value (NAV): Definition, Formula, Example, and Uses
Net asset value (NAV) is the value of an investment fund that is determined by subtracting its liabilities from its assets.
According to available data, the Indian equity market has seen significant growth over the past five years, with the market cap of the FTSE India Index growing over 6 times in the last decade, indicating a substantial expansion in the market size; with recent reports stating that India’s NIFTY50 has delivered around a 10% return in 2024 alone, demonstrating a strong bullish trend in the market.
Bonus on Earning Potential
When you invest a certain amount and earn interest on the interest of the investment, it is known as compounding. Simply put, the profits earned from your investment are reinvested in the same investment. Hence, compounding enables you to earn interest on the main investment and also on the interest earned on that investment.
