Every fund has its own reference number, to make life deliberately complicated there are several different unique numbers for a fund “SEDOL” or “ISIN” are perhaps the most well used. This is nothing more than a way of locating the specific fund. All funds now have their own summary fact sheet, now called a Key Information Investor Document or KIID. How the financial world loves its acronyms.
Where and what the fund is invested into is a deliberate selection, designed to form part of your overall portfolio. The fund itself may be thought of as “high risk” (or “low risk”) but as part of a larger portfolio is designed to provide a combined risk for the entire portfolio.
On your statement you will probably then see the number of units. Think of this the quantity of your holding in the fund, which can run to several decimal places. This is what you hold, or what you have bought – units in the fund. These amounts will therefore only alter if you have added more money (bought more units). They might reduce for the opposite reason – you have withdrawn money or units were sold to pay charges.
Typically, the next column will be the price of the units on a specific day. Please note that the price changes each day and reflects the end of day value of all of the holdings within the fund. So in our example of the UK Smaller Companies Fund, this would be the value of all the equities (shares) held in UK Smaller companies at the end of the day. These are listed on global stockmarkets.
Value (or valuation)
This is typically the next column and is the sum of the number of units that you own in a fund, multiplied by the value.
Dimensional UK Smaller Companies Inc 46.694 units at £28.38 per unit is worth £1,325.18. In short: 46.694 x £28.38 = £1,325.18.
Your valuation is therefore a snapshot of the value of your funds on a specific day. It has happened, today’s value will be different. Having quarterly valuations really means that you have 4 days in the year of information.
When you look at your statement you may well compare it against a previous one. You might see changes in the funds held (if we have advised any) or changes in the units – even if no new money has gone in (due to a rebalance or re-invested income). You may observe that some of the values have fallen or risen. This reflects the fund and the market at the time.
It is tempting to think that funds that are worth less must be doing badly. This is not necessarily the case, in fact its highly unlikely to be true. It is merely the current value, not a reflection on the fund, which is selected specifically for its cost, reliability and the way it combines with your other holdings. Think of each fund as a parts of a car, you don’t have all engine or only tyres, it is put together deliberately to produce a longer term overall performance, designed with decades in mind, not days or quarters. In practice the different bits are asset classes – types of liquid investments that can be priced reliably on regulated global markets.
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email firstname.lastname@example.org