How are investment returns calculated?

2015-03-30 10:00

Musiwa asks:

I just opened an investment account with Stanlib Balanced Fund and I am adding money every month to this unit trust fund. I would like to understand how they calculate the returns.

Stanlib retail managing director Bongani Mageba replies:

Unit trusts or collective investment schemes registered with the Financial Services Board have to comply with the Collective Investment Schemes Control Act.

This act dictates the manner in which funds are priced and, ultimately, the environment they are allowed to operate in.

Your investment in a particular unit trust or collective investment scheme is divided into equal parts, known as units. Your investment will purchase units in the relevant fund.

The amount of units you receive depends on two factors: the amount you invest and the value of the fund on the day of the investment.

The value of the underlying investments in the fund is used to calculate the value of each unit purchased – this is called the net asset value and varies according to the market value of the investments in that portfolio. The net asset value of the unit will reflect the price of the share, bond or other instruments in which the investor’s money has been invested, and will therefore change every day based on the underlying value of the shares or bonds in that portfolio.

There is, however, one exception to the varying net-asset-value rule. Money market funds are currently not priced at market value, but rather at a fixed price of R1 per unit. Interest accrues daily and is capitalised monthly.

The Stanlib pricing department is responsible for calculating the net asset value, which is published and advertised every day. As previously explained, market movements on the day could mean the net asset value is different from the previous day.

In reference to your question, the return of any fund is calculated by the growth or decline of the net asset value (price of a unit) over a particular period. The net asset value of this fund at any point in time would thus consist of interest and/or dividends being accrued, and the capital values of the underlying shares, bonds and cash instruments being invested in at varying amounts.

For example, the net asset value of our Stanlib Balanced Fund was published as 725.10c on March 12 2015 and at 729.8c on March 16 2015. If you had invested R7?500 in the fund on March?12, you would have bought 1?034 units (R7?500/725.1c). On March 16, those units would be worth R7?549 (1?034 x 729.8c). This clearly illustrates a positive return over the noted period.

If, for example, your next R7?500 was invested at a net asset value of 730c, then you would have bought 1?027 units (R7?500/730c). You would now have a total of 2?051 units valued at 730c per unit, or R15?050.

In a nutshell, your investment returns are calculated daily based on underlying investments such as shares or bonds.

When will I get my pension fund money?

Tello writes:

Irecently resigned from my government job. How long does it take to receive my pension from the Government Employees’ Pension Fund (GEPF) once the necessary documentation has been submitted?

City Press replies:

The Retirement Member Campaign launched in 2013 reduced the turnaround time for exit to date of payment to about 20 days.

This is, however, dependent on a number of factors, one of which is whether the department for which you work has joined the Go Live programme. This is a shift to benefits payment automation that uses online submissions of exit documentation.

The most important thing is to ensure all your necessary paperwork is completed and correct. This can be checked with the human resources department. Most delays in payment result from slip-ups or mistakes in the submissions process and/or when completing the final documentation.

Where do I report debit-order scams?

Lebo writes:

There are companies accessing bank accounts and making unauthorised debits on behalf of other companies. They deduct less than R100, which means your bank will not send you an SMS notification, and these transactions will only be clear once one requests a bank statement.

I tried calling these companies without getting any help. Some of these companies are Digicash, Satnov, Xfinity and Makazi.

Is there a body that regulates this? Is there a number to call to report these activities?

City Press replies:

According to the Payments Association of SA (Pasa), there are rogue elements using the debit-order system to deduct money illegally. They hope that customers do not notice the illegal debit orders.

Most of these fraudsters have been found operating out of small call centres in the Durban area.

These syndicates illegally obtain a database of accounts and hit these accounts with small amounts. The fact that so few people actually check their bank statements allows these crimes to go undetected for long periods of time.

The syndicates also target lower-income earners, who may not know their rights or know how to raise a dispute – they simply close their bank account, forgoing the funds that have already been stolen.

The good news is if you know your rights and are prepared to challenge the bank, the bank is 100% liable for any debit orders that have not been authorised.

You need to raise the issue with your bank and notify Pasa at

Why am I penalised for leaving a fund?

Ronald writes:

Please explain why you are severely penalised when you resign from a pension fund.

City Press replies:

When you contribute to your company pension fund, it is with before-tax money. In other words, you have not paid tax on this amount.

Government provides this incentive in order to encourage people to save for their retirement.

If you cash in your funds before retirement, the SA Revenue Service taxes the amount because you are no longer keeping it for retirement purposes.

Although your question was specifically around a company pension fund when you resign, it is worth noting that if you have taken out a retirement annuity, you could face penalties if you stop contributing to the fund.

These penalties are due to costs that the company recoups for early surrender, although rules apply about how much they are able to deduct.

New investment-linked retirement annuities do not carry these penalties.

How do I build up an emergency fund?

Afrika writes:

How do I build an emergency fund when there is already so much I need to spend money on?

City Press replies:

An emergency fund is what stops you from going back into debt if you are trying to get back on your feet financially, so it should be part of any healthy financial plan. Although the aim is to build up to three months’ worth of monthly expenses, start small.

Put R1?000 away and then add to it until you have R10?000.

Putting this money away should be your first priority before other savings or investments.

Once you have your R10?000 put aside, you can then start looking at other areas of your financial plan, like fast-tracking debt repayments or starting an investment fund.

Over time, you can top up your emergency fund when you have extra money, such as your 13th cheque or a tax rebate, to reach the target.

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