Browse Analysis of Managed and Structured Products

18.5.1 Reading Mutual Fund Quotes

A comprehensive guide on understanding how to read and interpret mutual fund quotes with detailed explanations, formulas, and examples.

Overview

Reading mutual fund quotes can be a complex task, especially for those new to investing. Various sources report the Net Asset Values per Share (NAVPS) of mutual funds on either a daily or weekly basis. They often include information such as simple and compound rates of return, fund volatility, expense ratios, and the maximum sales or redemption charges of each fund. Understanding these terms is crucial for making informed investment decisions.

Sample Mutual Fund Quotation

The following table shows a typical mutual fund quotation, including relevant data and performance metrics for the fund ABC Growth.

Table 18.8 | Reading Mutual Fund Quotations

Day High Low Close $ Change % Change 1 mo 1 yr 3 yr 5 yr Vty High (Weekly) Low (Weekly) Close (Weekly) $ Change (Weekly) % Change (Weekly)
Friday 16.73 14.50 16.62 -0.06 -0.36% 4.0 6.3 10.0 7.9 4 ABC Growth 16.73 16.62 16.62 0.01 0.06%

Key Components of Quotation

  • Net Asset Value per Share (NAVPS) indicates the per-share value of the fund.
  • For ABC Growth: NAVPS has traded as high as $16.73 and as low as $14.50 in the last 52 weeks.

Volatility (Vty)

  • Volatility (Vty) measures the variability of the fund’s returns compared to other funds in the same asset class. It is recorded on a scale from 1 to 10, with 1 being the least volatile and 10 being the most volatile.
  • In this example, ABC Growth has a volatility rating of 4.

Daily Performance

  • $ Change: Shows the change in NAVPS from the previous trading day. ABC Growth saw a $0.06 decrease.
  • % Change: Reflects this change as a percentage (-0.36% decrease).

Periodic Returns

  • 1mo, 1yr, 3yr, 5yr: Indicates the rate of return for the specific periods, assuming all dividends are reinvested.
    • One Month Return: 4%
    • One Year Return: 6.3%
    • Three-Year Return: 10%
    • Five-Year Return: 7.9%

Weekly Performance

  • Displays high, low, and final NAVPS values along with $ and % changes over the last week.

Money Market Funds

The performance of money market funds is reported differently. Typically, they maintain a relatively fixed NAVPS, which means financial sources will report each fund’s current and effective yield rather than the NAVPS. Here are the two commonly reported yields:

  • Current Yield: Rate of return over the most recent seven days, expressed as an annual percentage.
  • Effective Yield: The annual rate of return assuming the current yield is compounded throughout the year.

Glossary of Key Terms

  • NAVPS (Net Asset Value per Share): The per-share value of a mutual fund calculated by dividing the total value of the fund’s assets by the total number of outstanding shares.
  • Volatility (Vty): Measure of the price movement of the mutual fund. A higher number indicates higher volatility.
  • Rate of Return: The gain or loss on an investment over a set period expressed as a percentage.
  • Current Yield: The annual yield on money market funds based on the most recent seven days.
  • Effective Yield: The yield of money market funds, assuming reinvestment of dividends and compounding.

Key Takeaways

  • Understanding Mutual Fund Quotes covers knowing the indices like NAVPS, volatility, and rate of return for different periods.
  • Money Market funds are generally less volatile, and their performance is reported through current and effective yields.
  • When distributions are made, the NAVPS decreases, but reinvested dividends mean that investors are not experiencing a loss.

Frequently Asked Questions (FAQs)

Q1: What is NAVPS and why is it important?

A1: NAVPS (Net Asset Value per Share) is the per-share value of the fund’s assets minus its liabilities. It’s important as it reflects the fund’s value and is an indicator of the price at which investors can buy or sell their mutual fund shares.

Q2: How is the Volatility (Vty) of a mutual fund measured?

A2: Volatility is a measure of the variability in the fund’s returns compared to other funds of the asset class. Ratings range from 1 (less volatiles) to 10 (most volatiles).

Q3: Why don’t money market funds report NAVPS?

A3: Due to their relatively fixed NAVPS, financial sources report these funds’ current yield and effective yield to provide more meaningful performance data.


CSC® Exams Practice Questions

📚✨ CSC Exam Questions ✨📚

Welcome to the Knowledge Checkpoint! You'll find 10 carefully curated CSC exam practice questions designed to reinforce the key concepts covered. These questions will help you gauge your grasp of the material, identify areas that need further review, and ensure you're on the right track towards mastering the content for the Canadian Securities certification exams. Take your time, think critically, and use these quizzes as a tool to enhance your learning journey. 📘✨

Good luck!

## What does the NAVPS measure in a mutual fund? - [x] Net Asset Value per Share - [ ] Net Annual Volatility per Share - [ ] Nominal Asset Value per Share - [ ] Net Anticipated Value per Share > **Explanation:** NAVPS stands for Net Asset Value per Share, which is the market value of a fund's assets minus its liabilities, divided by the number of shares outstanding. ## What does a Vty of 10 indicate in a mutual fund? - [ ] Lowest variability in returns - [ ] Average variability in returns - [x] Highest variability in returns - [ ] Fixed returns > **Explanation:** A Vty (volatility) measure of 10 indicates the highest variability in returns compared to other funds in the same asset class. ## How often are the current net asset values of mutual funds typically reported? - [ ] Monthly - [x] Daily or weekly - [ ] Quarterly - [ ] Annually > **Explanation:** Many financial sources report the current net asset values of mutual funds on either a daily or weekly basis. ## What was the highest NAVPS of ABC Growth in the last 52-week period? - [x] $16.73 - [ ] $16.62 - [ ] $14.50 - [ ] $16.00 > **Explanation:** ABC Growth had a highest NAVPS of $16.73 per share during the last 52 weeks. ## What does the "Cls" column represent in Table 18.8? - [ ] Opening price of the fund - [x] Closing price of the fund - [ ] Net asset value change - [ ] Volatility index > **Explanation:** The "Cls" column represents the closing price of the fund for that trading day. ## For a given day, if the NAVPS closed at $16.62 and dropped by $0.06, what was the previous day's closing NAVPS? - [ ] $16.56 - [ ] $16.68 - [x] $16.68 - [ ] $16.70 > **Explanation:** If the NAVPS closed at $16.62 after dropping by $0.06, the previous day's closing NAVPS was $16.68. ## Which rate of return is NOT given for ABC Growth? - [ ] One-month rate of return - [x] Six-month rate of return - [ ] One-year rate of return - [ ] Five-year rate of return > **Explanation:** The six-month rate of return is not provided for ABC Growth. ## How are the performance metrics for money market funds typically reported? - [ ] Net Asset Value per Share - [ ] Weekly yield - [x] Current and effective yield - [ ] Volatility index > **Explanation:** The performance of money market funds is generally reported in terms of the current and effective yield. ## What impact does a distribution have on the NAVPS of a mutual fund? - [x] Decreases the NAVPS by the amount of the distribution - [ ] Increases the NAVPS by the amount of the distribution - [ ] Keeps the NAVPS unchanged - [ ] Has no impact on NAVPS > **Explanation:** When distributions are made, the NAVPS is decreased by the amount of the distribution. ## What is the effective yield of a money market fund? - [x] The rate of return if the current yield were compounded over a year - [ ] The total gains and losses over the last year - [ ] The average annual returns over several years - [ ] The weekly increase in NAVPS > **Explanation:** The effective yield is the rate of return that would result if the current yield were compounded over a year, allowing for comparison with other compounding investments.

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