Flaws In Net Asset Value Calculations

by David Jenyns on September 1, 2008

Almost all investors pay attention to the record of investment firms. The past record is sometimes called a guide to the future, but this record can be flawed, especially where net asset value is concerned.

Investment services and commentators have devised methods for comparing the “performance” of investment firms with unmanaged indexes or averages of relevant security prices.

In one important respect, the net asset value as it is invariably stated leaves something to be desired. It might be desirable for investment firms to publish, along with this information, data on the average net asset value in the aggregate and on a per share basis. The best way to avoid falling victim to the appearance of net asset value presentations is by educating yourself on the meaning and calculation behind net asset value.

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