One of the most frequent questions asked by clients is the difference between net invested, book value, and market value.  A lot can be said of all three, but the simple explanation is as follows:

Net invested: The amount you contributed (minus any money redeemed)
Book Value: The amount you contributed plus distributions received
Market Value: What the investment is worth today.

Example: You invest $100,000 in a mutual fund on January 1st. The investment increases 10% throughout the year and makes a $3,000 distribution at the end of the year. Therefore:

• Your net invested is $100,000
• Your book value is $103,000
• Your market value is $110,000

Clients often compare book value with market value to gauge their performance. This is not a fair way to assess performance as the book value will also include any distributions received. The best way to measure performance over time is to compare market value with net invested.

So, what is the purpose of book value? Book value is largely used in connection with capital gain or loss calculations for tax reporting. Using the example above, the capital gain for tax purposes is $7,000.

For a more detailed read on this topic, kindly refer to the attached PIMCO piece here.

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.