'Bid to bid' describes the method of valuing a fund's units based on the bid price. The bid price is the price at which an investor can sell units of the fund. This method contrasts with using the offer or selling price. 'Bid to bid' valuations are crucial for investors to understand as they provide a more realistic view of what they would receive if they sold their holdings.
When assessing the performance of a fund, considering the 'bid to bid' returns is important. These returns reflect the actual gains an investor would realise, excluding any initial charges or fees that might be applied when buying the fund. Therefore, 'bid to bid' figures often present a more accurate picture of the fund’s performance over time, especially for comparison purposes.
While 'bid to bid' valuations offer clarity, investors must be aware of the other costs associated with the fund, like management fees or exit charges. These costs, although not reflected in the 'bid to bid' price, affect the net return on investment. Therefore, investors should consider all associated costs and not just the 'bid to bid' performance when evaluating mutual fund investments.
This Trustnet Learn article was written with assistance from artificial intelligence (AI). For more information, please visit our AI Statement.