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Net Investment Gain

Net investment gain is the amount of performance gain in dollars attributable to a particular investment over a specific time period.

There are two ways to calculate investment gain, both of which give the same result.

Method 1: Start with the ending value and subtract the starting value and flows.

Investment Gain = End Value – Start Value – Inflows – Outflows – External Fee Payments

Method 2: Sum up the total of the capital appreciation, income and expenses, and change in accrued for that security.

Investment Gain = Capital Appreciation + Income and Expenses + Change in Accrued

For example, an account begins the period holding with 10 shares of security XYZ priced at $25, worth $250. The client deposits $90 and buys 3 more shares of XYZ for $30 each. During the period, XYZ pays out a dividend of $10. At the end of the period, security XYZ is worth $30 per share.

Method 1 Calculation: End Value = 13 shares of XYZ × $30/share + $10 dividend = $400

Start Value = 10 shares of XYZ × $25/share = $250

Inflow = $90 cash deposit

Outflow = $0

Investment Gain = $400 (End Value) - $250 (Start Value) - $90 (Inflows) - $0 (Outflows) = $60

 

Method 2 Calculation: Capital Appreciation = 10 shares of XYZ × $5/share increase + 3 shares × $0/share increase = $50

Income and Expenses = $10 dividend

Change in Accrued = $0

Investment Gain = $50 (Capital Appreciation) + $10 (Income and Expenses) + $0 (Change in Accrued) = $60