A Value Added Monthly Index (VAMI) is used to display the monthly performance of a hypothetical amount, assuming reinvestment, month on month, over a period of time. VAMI represents the total returns for an investor over the specified period of time. It depicts realistic returns as it includes capital gains and reinvestment of dividends and any interest earned. It is calculated on the basis of net monthly returns, which means management fees and brokerage charges have already been adjusted.
Key features of Value Added Monthly Index are:
a) It is a common metric for describing a fund’s performance and is easily understood by investors.
b) Apart from the fund’s performance, it helps in understanding the growth of invested amounts over a period of time.
c) It can be used for evaluating Fund Manager’s performance and for comparing multiple funds and index benchmarks.
Benefits of Value Added Monthly Index are:
1. VAMI charts can be customized for picking funds from a family of funds.
2. VAMI provides inputs on investment performance over a period of time, which can be easily customized.
3. They can also be used for making future projections on a similar basis.
4. VAMI can be used for similar funds across categories, fund classes or funds from different asset classes to provide investors with a perspective on how an investment has performed over time.
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