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Value-Added Monthly Index (VAMI)

Reviewed by Anjaneyulu | Updated on Oct 05, 2020

Catalogue

Introduction

A Value-Added Monthly Index (VAMI) tracks, assuming reinvestment, the monthly output of a hypothetical $1,000 investment over a period of time.

A VAMI maps the total return an investor has earned over a specified period of time. This covers all capital gains and reinvestment of any disbursements, such as dividends and extra interest gained by compounding.

The main feature of VAMI is that monthly returns are measured using NET. This means that any applicable fees, such as management fees, incentives, and brokerage fees, have been deducted already and what remains is the actual return.

Understanding VAMI

VAMI is one of the most widely used metrics for showing investors the overall success of a fund. The success of VAMI stems from the fact that it is very concise in that it tells an investor how $1,000 has accomplished over a given period of time and is easy to understand.

A VAMI may be used for a variety of applications. It provides insight into the growth of the capital invested over time. Often, it can be used to measure a fund manager's results. A comparison of various funds and index indices is also helpful.

VAMI is calculated by multiplying VAMI of the preceding month by the NET return of the current month.

*VAMI first point = 1000 * (1 + current month's NET return)

Subsequent VAMI = Previous VAMI x (1 + current month's NET return) *

VAMI for Comparison

VAMI charts can be a credible way of comparing the market-wide performance of different funds and benchmarks. Such charts can be personalised by investors to select from the options in the fund family of a fund firm.

VAMI charts give investors a view on how an investment has achieved over time. These can also provide future forecasts with insight into current expectations.

VAMI charts may also provide a visual representation of how specific funds or funds from various asset class groups performed over a given timeframe, including benchmark returns for broader analysis.

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