NAV erosion calculator: did the payouts cover the price drop?
The fund paid you every month. But its share price kept sliding. Put in the start price, the end price and the payouts, and see what one share really made or lost.
How it works: price change = end price − start price. Total return = (end price + all payouts − start price) ÷ start price. That is what one share really made or lost, with the payouts taken as cash. If the price fell, the drop is set against the payouts: a drop bigger than the payouts ate all of them and some of your money too. The payouts break even with the drop when the end price is the start price minus the payouts. If you add the index's total return for the same dates, the gap is the fund's total return minus the index's, in percentage points. Taxes and reinvesting are left out.
What NAV erosion means
NAV is what one share of a fund is worth, based on what the fund owns. "Erosion" means that number keeps sliding. It happens a lot with covered call ETFs. The fund sells calls, which cap its gains when stocks rally. It pays out the premium, plus sometimes more. When stocks then fall, the fund falls with them. After a few rounds, the share price is lower than where you bought, even though the payouts kept coming. This calculator shows whether the payouts made up for it. For the trade the fund runs, see covered call ETFs vs doing it yourself.
Why compare it with the index
A fund can pay you every month and still trail the plain index fund it is built on. The index column is your honest yardstick: same stocks, no calls sold. Look up the index's total return, which counts its own dividends, for the same start and end dates. If the gap is large, the payouts were your own growth handed back in smaller pieces. Selling calls yourself, as in the wheel strategy, has the same cap. The difference is that you choose the strike and see it happen.
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