What is Net Investment Income?
How Does Net Investment Income Work?
The formula for net investment income is:
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.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Dividend-paying stocks have been an ...Read More →
Most investors understand the need to keep a portfolio from becoming too risky. As we saw in 2008, those investors that were fully invested in the ...Read More →