ETFs

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how to calculate etf return

To calculate the return on an ETF, subtract the NAV at the beginning of a period from the NAV at the end and convert the difference to a percentage by dividing it by the initial NAV and multiplying by 100.

Oct 09, 2024 at 09:17 pm

How to Calculate ETF Return

ETFs (exchange-traded funds) are a type of investment fund that tracks a basket of assets, such as stocks, bonds, or commodities. They offer investors a diversified way to gain exposure to a particular market or asset class.

Calculating the return on an ETF involves determining the change in its net asset value (NAV) over a specific period of time. The NAV is the total value of the ETF's underlying assets minus its liabilities, divided by the number of outstanding shares.

Steps to Calculate ETF Return:

Gather the ETF's NAV data: Obtain the ETF's NAV on two different dates to compare. These dates should represent the beginning and end of the period over which you wish to calculate the return.
Calculate the NAV difference: Subtract the NAV at the beginning of the period from the NAV at the end of the period. This difference represents the change in the ETF's value over the specified time frame.
Convert the difference to a percentage: To express the return as a percentage, divide the NAV difference by the initial NAV and multiply by 100.
Annualize the return: If the time period is less than one year, annualize the return to make it comparable to longer-term returns. To do this, multiply the percentage return by the number of years in the time period.

Formula

ETF Return = (Ending NAV - Beginning NAV) / Beginning NAV x 100%

Example:

Let's say you購入了 an ETF with an NAV of $25 per share on January 1st, 2023. On December 31st, 2023, the ETF's NAV has increased to $27 per share.

Step 1: Gather the ETF's NAV data:

Beginning NAV (January 1st, 2023): $25
Ending NAV (December 31st, 2023): $27

Step 2: Calculate the NAV difference:

NAV difference: $27 - $25 = $2

Step 3: Convert the difference to a percentage:

Percentage return: ($2 / $25) x 100% = 8%

Step 4: Annualize the return (assume a one-year time period):

Annualized return: 8% x 1 = 8%

Therefore, the ETF's return for the year 2023 is 8%.

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