The number of units you receive when you invest in a mutual fund is equal to the amount of money that you place in the mutual fund (minus any sales charges) divided by the market value of the units on that day.
The market value of the units on any given day is calculated by taking the market value of all of the assets (stocks and bonds) owned by the mutual fund, subtracting the administration fees of the manager and other expenses to obtain the net asset value, and dividing that by the total number of units held by all unitholders.
Most of the information on your investment account statement is expressed in terms of units. For example:
- You can see how much your units have earned over different time periods.
- Your rate of return tells you how the fund’s units have performed over a specific time period.
Even if you haven’t sold your units, you still receive some of the return that they have earned through interest, dividends or capital gains distributions, which are typically reinvested in your account.