INVEST COMPOUND ACADEMY

NAV erosion

Explore what can happen when a fund distributes more than the portfolio earns over time.

Starting NAV $20.00Annual total return 6%Annual distribution rate 10%Years 10

Illustrative ending NAV$—This simplified model assumes constant return and distribution rates and ignores taxes, fees and path dependency.

What this teaches

A high distribution rate is not automatically the same thing as a high investment return. If distributions persistently exceed total return, part of the payout may effectively come from the investment’s own capital base, which can pressure NAV over time.