Investing in ETF's and calculation of Net Asset Value (NAV)

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Exchange Traded funds, popularly known as ETF's are some-what similar to Mutual funds. Exchange Traded Funds or ETF's is basically a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETF's experience price changes throughout the day as they are bought and sold and the NAV for ETF is dependent on movement of a stock index over a period of time.

Benefits of putting your money in Exchange Traded funds is that it helps in getting a broad exposure to stock, bonds and comodities, which are traded daily on various stock exchanges. ETF's are similar to Mutual Funds as both's performance is based on value of Net Asset Value or 'NAV'. Since ETF's are actively traded they are thus similar to stock trading.

Net Asset value of ETF is generally calculated at end of the trading day of Exchange. Following is method for calculating the investment return percentage for ETF. Since Exchange Traded funds trades through out the day, hence for getting accurate numbers use the iNAV(Intraday Net Asset Value), There would be very less difference between NAV and iNAV though.

Calculating ROI in Exchange Traded Funds:

Purchase price of 1 NAV -> INR 50
Number of shares purchased -> 75
Total Money invested in ETF's -> (Price of 1 NAV)*(Total number of Assets purchased) = 50*75 -> INR 3750

Price of single NAV after 3 months -> INR 60
Total value of investment after 3 months waiting period -> 60*75 -> INR 4500

Net Appreciation = 4500 -3750 = INR 750 or 20 percent return.