The application is divided into 2 parts
- Investor Part, which is using the concept of NAV (Net Asset Value) in Investment Funds.
- Portfolio Trading Part, which is using the concept of FIFO (First-In, First-Out) in securities trading
For the first time, users need to begin with Investor Part by entering investor’s name and initial investment amount.
assume Investor A and B has initial investment amount of 100$ and 200$ respectively.
The 300$, from total 30 investment units in Investor Part, will be using in Trading Part as the source of funds (cash).
Let use this available portfolio cash to buy Stock A and B on day 1, and assume their prices have been changed some days later, as shown below.
NAV is the measurement of investment performance. It can be calculated from
NAV = Net Asset Value / Investment Units
Notice that NAV has now increased from 10.0000 $/unit from the beginning to 10.5000 $/unit. This indicates that we’re making profit since day 1.
Let sell all Stock A, the amount received, 130$, will be added to portfolio cash, which now becomes 50$ + 130$ = 180$.
Now, assume Investor A wants to withdraw his investment, say 60$. If we look into Investor Part, we’ll see that the available cash isn’t enough, 0$. Therefore, Investor A needs to sell some of his investment units to receive additional cash before the withdrawal, say 6 units.
Let summarize values affected by Investor A’s withdrawal as below.
The 3$ available cash is the leftover of 63$ received from selling investment units deducted by 60$ withdrawal. This amount is belong to Investor A.
Notice that the portfolio cash in Trading Part is deducted by the same amount as well, 63$ (from 180$ to 117$).
It may be Investor B’s interest that his wealth will remain unaffected by Investor A’s action. Let quickly examine NAV at present, = 252$ Portfolio Values / 24 Investment Units, which is 10.5000$. Therefore it is still the same value as the NAV value before Investor A’s withdrawal.
In conclusion, whatever an investor does will not have any impact on other investors in the group.
Please note that it’s strongly recommended that users take the NAV value as suggested by the application because it’s the NAV calculated at the state, as illustrated above; otherwise each investor may experience individual profit or loss.
For startup NAV, the general default value is 10.0000 $/investment unit.