The Returns are simply calculated as:-
= Current invested amount/(Start amount - Amount removed + Amount added)
Whereas, NAV returns is calculated assuming no addition/removal of money from the bundle.
Example- Let's assume the timeline of your investment in a particular strategy
- Starting Balance - 200
- Strategy executes a trade and generates 10% profit, now the current balance is 220
- Now you add 200 more, hence the current balance is 420
- Again strategy executes another trade of 5% profit, now the final balance is = 441
Total Invested Amount = 200+200 = 400
Current Value = 441
Hence, Returns = (441-400)/400 = 41/400 = 10.25%
For NAV, addition removal is not considered and it effectively starts from a 100 balance
- Hence the starting Investment amount = 100
- Strategy executes a trade of 10% profit, now the current balance is 110
- If you add 200 more, this will not make any difference hence the amount remains 110
- Strategy does another trade of 5% profit, now balance = 115.5
Here NAV = 115.5/100 = 15.5%
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