What is the Value Added Monthly Index (VAMI)?
The Value-added Monthly Index (VAMI) tracks the monthly performance of a virtual $ 1,000 investment over a period of time, assuming a reinvestment.
- The Value-added Monthly Index (VAMI) shows how the monthly return on a proposed $ 1,000 investment will be over time.
- VAMI is one of the most commonly used indicators to show investors the overall performance of a fund.
- VAMI is calculated using monthly net income starting at $ 1,000 at zero hours.
Understand Value Added Monthly Index (VAMI)
The value-added monthly index shows the total return earned by the investor over the specified time period. This includes not only capital gains, but also reinvestment of payments such as dividends and additional interest earned on compound interest. Another important aspect of VAMI is that it is calculated using NET’s monthly revenue. This means that applicable fees such as administration, incentives and brokerage fees have already been deducted, and all that remains is the actual revenue.
This is one of the most commonly used indicators to show investors the overall performance of a fund. VAMI’s popularity stems from the fact that it is very descriptive in that it shows how investors performed $ 1,000 over a particular period of time and is easy to understand.
The value-added monthly index can be used for a variety of purposes. It may provide insight into the growth of investment capital over time. In some cases, it can be used to assess the performance of fund managers. It is also useful for comparing index benchmarks with multiple funds. VAMI is calculated by multiplying the previous month’s VAMI by the current month’s NET return.
- First point of VAMI = 1,000 * (1 + NET return of this month)
- Subsequent VAMI = Previous VAMIx (1 + NET return this month)
Use of VAMI for comparison
VAMI charts are a reliable way to compare the growth of different funds and benchmarks across the market. Investors can customize these charts to choose from fund family options of fund companies. VAMI charts provide investors with an outlook on how their investments were made over time. It may also provide insight into potential expectations for future projections.
VAMI charts can also visually show how similar funds, or funds in different asset class categories, performed in a specified time frame, including benchmark returns for a broader analysis. ..
Numerous market platforms offer VAMI tools for investor analysis. These tools allow for different inputs, such as higher initial capital value and different time periods.
Value-added monthly indexes can be built using technical software programming. This usually starts with a $ 1,000 virtual investment. However, the initial investment level may vary. When using this modeling technique, estimation results can be distorted by data quality, so it is important to ensure the availability and quality of the data to provide relevant graphs. VAMI charts can be created with Microsoft Excel or other technical software programs. The online version, often provided by financial services companies, helps provide a graphic representation of the value of your investment over time.
Morningstar gives an example of a VAMI tool that is part of a research offering for mutual funds. Under the Charts tab, investors are offered virtual growth in their first $ 10,000 investment. A survey of the Vanguard 500 Index Fund for the year January 26, 2017-January 26, 2018 shows that the VAMI chart shows that investors’ investment of $ 10,000 has increased to over $ 12,500.