1. Explain the importance of net asset value (NAV) for mutual fund investing
Net asset value (NAV) is delineated as the value of assets of a mutual fund scheme less the value of liabilities for every unit. It is the price in which an investor can purchase the unit of a scheme and also at the same time can be price at which the investor can sell the unit, less any load fees that might be applicable. The net asset value is significant for mutual fund investing as it mirrors the composite prices of all the securities held within the portfolio together with the liquid cash. Imperatively, if the prices of a great deal of the securities within the scheme increase, then the net asset value will also increase and the other way round. In addition, the net asset value moves concurrently with the prices of securities that are held within the mutual fund scheme (Rastogi, 2016). However, it is imperative to note that as an investor, it is not suitable to solely consider the NAV when making investment decisions.
2. Now look at the performance of ProShares UltraShort Silver (ZSL) fund and iShares Russell 2000 Index (IWM). Use NAV and other criteria to choose one fund for investment purposes. Yahoo performance reports provide a good overview. Please explain your reasoning in brief
3. Fund Name
NAV
Launch Date
Assets Under Management
1 year YTR
Expense Ratio
I Shares Russell 2000 ETF
$149.33
22nd May 2000
43.62 billion
11.76%
0.20 percent
ProShares UltraShort Silver
$32.02
1st December 2008
22.96 million
-16.51%
0.95 percent
The net asset value of iShares Russell 2000 ETF (IWM) is $149.33 whereas that of ProShares UltraShort Silver (ZSL) fund is $32.02. As can be perceived, ProShares UltraShort Silver fund is relatively newer as compared to the iShares Russell 2000 fund being created approximately 8 years later. However, the assets under management under IWM are significantly greater standing at $43.62 billion whereas ZSL is presently managing assets worth 22.96 billion. In addition, the IWM has a considerably lower expense ratio rate standing at 0.20 percent whereas ZSL has an expense rate of 0.95...
References
Danske Invest. (2017). Japanese Equity Fund. Retrieved from: https://www.danskeinvest.fi/web/show_fund.produkt?p_nId=1527&p_nFundgroup=61&p_nFund=2452
Investopedia. (2015). What are the advantages of foreign portfolio investment? Retrieved from: https://www.investopedia.com/ask/answers/061515/what-are-advantages-foreign-portfolio-investment.asp
Krueger, P. (2017). Active vs. Passive Investing. Investopedia. Retrieved from: https://www.investopedia.com/news/active-vs-passive-investing/
Nickolas, S. (2015). IWM: iShares Russell 2000 Index ETF. Investopedia. Retrieved from: https://www.investopedia.com/articles/investing/123115/iwm-ishares-russell-2000-index-etf.asp
Rastogi, A. (2016). Does Net Asset Value (NAV) really matter? The Economic Times. Retrieved from: https://www.google.com/amp/s/m.economictimes.com/mf/learn/fund-basics/does-net-asset-value-nav-really-matter/amp_articleshow/55435264.cms
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