If a stockbroker is charging 1.5% as management fee for a fund on net asset value, does that apply to my invested capital or only on the accrued profit?
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If a stockbroker is charging 1.5% as management fee for a fund on net asset value, does that apply to my invested capital or only on the accrued profit?
When a stockbroker or fund manager charges 1.5% management fee on Net Asset Value (NAV), the fee is charged on your total investment value, not just the profit. What "1.5% on Net Asset Value" Means Net Asset Value (NAV) = Your invested capital + accrued profit (or loss) So the 1.5% is calculated onRead more
When a stockbroker or fund manager charges 1.5% management fee on Net Asset Value (NAV), the fee is charged on your total investment value, not just the profit.
See lessWhat “1.5% on Net Asset Value” Means
Net Asset Value (NAV) =
Your invested capital + accrued profit (or loss)
So the 1.5% is calculated on the total value of your investment.
Example 1 — If Your Investment Makes Profit
You invested: ₦100,000
Profit earned: ₦10,000
Total NAV: ₦110,000
Management fee =
1.5% × ₦110,000 = ₦1,650
So they charge on ₦110,000, not just the ₦10,000 profit.
Example 2 — If Your Investment Makes Loss
You invested: ₦100,000
Value drops to: ₦95,000
Management fee =
1.5% × ₦95,000 = ₦1,425
Even if you’re at a loss, management fee is still charged.
Important: How This Fee is Usually Charged
Most fund managers:
Don’t deduct once yearly
Deduct daily or monthly (pro-rated)
Already reflect it in your NAV
So you may not see the deduction directly — it’s already embedded.
Why This Matters (Smart Investor Insight)
A 1.5% management fee is:
Low–Moderate for actively managed funds
High if returns are low
General rule:
0.5% – 1% → Very good
1% – 1.5% → Acceptable
Above 2% → Expensive
Since you’re getting deeper into investment analysis (you’ve been asking about CPs, financial statements, funds), this is a very good question — professionals always check fees first because:
High fees reduce long-term returns significantly 📉