posted on 06-06-2019

Net Investment Income

Updated October 1, 2019

What is Net Investment Income?

Net investment income is what an investment company receives in capital gains, dividends and interest payments, less administrative fees. 

How Does Net Investment Income Work?

The formula for net investment income is:

Net Investment Income = Capital Gains + Dividends + Interest Income - Administrative Fees

For example, let's assume Fund ABC is reporting its performance results for the year. It has invested in a portfolio of growth stocks, income stocks and corporate bonds. The growth stocks realized a capital gain of $100,000, the income stocks realized a capital loss of $50,000 but also paid out $10,000 in dividends, and the corporate bonds maintained their value and paid out $20,000 in interest. Fund ABC paid $5,000 in administrative fees.

Using the formula, Fund ABC's net investment income is:

Net Investment Income = ($100,000 - $50,000) + ($10,000) + ($20,000) - ($5,000) = $75,000

Why Does Net Investment Income Matter?

Investment income is a measure of profit for investment companies such as mutual funds, and it is typically shown on a per share basis. Individual investors can also have investment income, however. Investment income often is taxed differently than other income.