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Understanding NAVPU Better

As an investor, I tend to be rather impulsive. So, I decided to do more studying about the NAVPU. NAVPU means Net Asset Value Per Unit. So, how do we get the NAVPU? My first understanding of NAVPU is the amount per unit to make up one unit. For example, if the NAVPU is at least PHP 100.00 per unit then spending PHP 1,000.00 will give me 10 units of that certain Unit Investment Trust Fund (UITF). However, how do we fully understand the NAVPU?

As a Metrobank client, I decided to look into Metrobank to further understand what NAVPU means than just the amount of units I can get depending on the price per unit. Here's what Metrobank says about how to understand NAVPU when investing:

Understanding the Net Asset Value per Unit

Net Asset Value per Unit, or NAVPU, on the other hand, is the underlying value of each unit. NAVPU is important because it allows you to compare how different schemes are trading, even though they may have very different prices. A large difference between price and NAVPU suggests that the market believes that either some better pricing is available, or that the NAV is overstated.

Investing in a Unit Investment Trust Fund (UITF) means you are buying units of participation. The amount of units you get depends on how much money you invest. How much each unit is worth will depend on the Net Asset Value Per Unit (NAVPU) which is the current market value of each unit of participation in the fund.

NAVPU Computation Method

NAVPU (net asset value per unit) is the total market value of the investment fund minus expenses and liabilities, divided by total number of units of participation.

How to understand and interpret NAVPU

To determine the value of your UITF investment, simply multiply the net asset value per unit (NAVPU) by the number of units of participation acquired. The value of the NAVPU changes daily depending on current market conditions

NAVPU will be different for various funds because the value of their investments will be different.
These expenses will include management fees. As the Bank of the Philippine Islands would like to illustrate the formula as follows with these images owned by them:

BPI

Trying to take a look at the value of all securities (Total Asset Value) less the expenses which include the management fees, taxes, and every other expenses. In short, it's very similar to a stock market where there are buying fees and selling fees. The NAVPU would mean that there's some deduction done in the process such as the annual management fee. If my AXA Chinese Tycoon Fund management fee is 2.5% per year then I'm charged 0.2083% per month whenever I pay the PHP 3,000.02 monthly charge. That means I'm paying PHP 6.25 per month for every time I pay the monthly fees. Meanwhile, if I get the Philippine Stock Equity Index Fund's 1.5% management fee then I'm paying PHP 1.25 as a management fee per PHP 1,000.00. This of course is not yet the NAVPU since the taxes and other expenses aren't accounted for yet. NAVPU would mean all expenses have been paid for. 

In accounting, your net profits are profits that are done after paying all expenses. A company pays its managers (management fees), workers (otherwise said workers have every right and duty to quit a company that doesn't pay them properly), and other expenses (such as electricity, water, and phone bills) then there are still taxes. Deduct all revenues minus all expenses and that becomes the net profit after taxes. The net profit after taxes goes to the capital which must subject itself (again) to be used for future expenses. The capital provides the equipment, materials, salary for all kinds of workers (hence they become partakers of the fruit of the labor), and the money for all accounts payable. 

So, the NAVPU is basically the profit per unit when the management fees, taxes, and every other expenses (such as buy and sell fees) are accounted for. So, the best way to buy in bulk is to wait for the NAVPU to be in dip. Meanwhile, the NAVPU may not always be at a dip so setting a minimum amount (such as PHP 1,000.00 to PHP 2,000.00 for beginners) per month would be beneficial. I would invest every month even when the market is high (buy high, sell higher) and then buy more than usual when the market is low (buy low, sell higher). A combination of both for a certain span (I intend to use the money later) would probably give me the best yields overall. So, during the span of five years ore more--my focus is to invest more during a bear more or invest less during a bull market. 

References

Websites

"Investment Academy: NAVPU and NAVPS" 

"Net Asset Value per Unit (NAVPU)"
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