 Personal finance practice problem using OneNote. Mutual fund gained loss calculation. Prepare to get financially fit by practicing personal finance. You're not required to but if you have access to OneNote we'd like to follow along. We're in the icon left hand side practice problems tab in the 13110 mutual fund gained loss calculation tab. Also take a look at the immersive reader tool practice problems typically in the text area too with the same name same number but with transcripts transcripts that can be translated into multiple languages either listened to or read in them. We're imagining we're investing in mutual funds remembering that as individual investors we could invest in individual stocks and bonds but oftentimes we're utilizing tools such as mutual funds and ETS allowing us to pool our money with other investors and the fund then allocating to a broader array of securities like stocks and bonds allowing us more diversification generally. Also remember that if you're investing in a 401k plan or an IRA usually you can think of that as usually you have a mutual fund type of instrument that's under the umbrella of a retirement plan such as 401k or IRA giving you tax benefits but also restricting your money in some ways as well that you have to consider so you don't have to think of it as a completely new entity it's basically usually kind of the same kind of investment tool which is under the umbrella which has some tax benefits and some restrictions related to it. Note that when we buy and sell shares of a mutual fund it looks very similar to when we buy and sell shares of an individual stock but as we go through the process remember what we are buying and selling we're selling a representation of a mutual fund which then has pooled together resources and invested in multiple securities which could include stocks and bonds as opposed to an individual stock which has a representation of ownership of one publicly traded company. Keeping that in mind we're going to say the shares purchased of the mutual fund 200 cost per share $14.25 a year later we're going to sell all 200 shares which you don't have to do you could sell just part of them right and we'll see that in a second and then the price is going to be $17 so we can see that we had a gain on it for the mutual fund here. Now also remember that if your mutual fund is under the umbrella of an IRA or some kind of retirement plan a 401k plan then when you sell it there's going to be different tax consequences you could be penalized if you pull the money out early for example because although it's the same instrument most of the time like a mutual fund that's the issue when you have it under an IRA or a 401k plan it's been put there to give you a tax benefit and if you take it out early there'll be tax consequences so just keep that in mind if it's outside of the IRA then you can purchase and sell them in a similar way as you might with stocks and you might experience then you know capital gain income and so on as you do that. Okay so we've got the total cost when we buy them we're going to calculate it this way first and then we'll do a couple different ways that we could see this calculation. The shares purchased we had 200 shares we're going to buy them for $14.25 so that means it cost us then the two thousand eight hundred and fifty two hundred times the 14.25 and then we're going to sell them we're going to imagine we had them we held on them to them for a year we're going to sell all of them all 200 shares and the price is $17 that means the proceeds that we receive are going to be 200 times the 17 or 3400 so then of course the gain is the difference between the two the sales price was $3400 a year later and we bought them for 2005 $2850 and that means we have a gain of $550 which could be subject to taxes like a capital gains in a similar way as with the stocks. Now remember as we do this this looks much the same as when we did this calculation with one individual stock so you can imagine the same kind of idea if I bought 200 shares of a company and then I sold those 200 shares and I had basically a gain the only difference here being that we're investing in the mutual fund the mutual fund is then investing in other things such as stocks and might have multiple stocks within the mutual fund and we have a representation of the mutual fund. Now within the mutual fund we could have other incomes that would be resulting from it because we could have dividends that are passing through the mutual fund in all the stocks and securities that are invested in and the mutual fund manager itself could buy and sell stocks within the mutual fund meaning we didn't buy and sell the stocks in that case the fund manager did that kind of income interest dividends gains from the sales in the mutual fund would be reported to us if they weren't under the umbrella of an IRA or 401k plan a tax plan that was under a tax benefit kind of plan then it would be reported to us in a 1099 for example and then when we buy and sell the shares then we usually have capital gain kind of idea in a similar fashion as when we buy and sell the individual stocks. Now note it's useful to see this calculation in this format too so we could say the per share profit let's say we just take the $17 per unit per share that we are selling the cost is the 1425 for it on a per share basis so that means that we have a difference per share a profit per share went up the value of the holdings went up $2 and 75 cents 17 minus the 1425 and then take that times the 200 shares and that will once again get us to the 5,500. Now also just realize that if you have expenses related to commissions on the sales it can muddy this calculation up a little bit but this calculation in general is a nice calculation to have because it's possible we don't sell the full 200 so meaning notice up here if i do this calculation up top i calculate the cost first and then the sales proceeds what if i bought 200 shares and i sold you know 100 shares you know i'd have to figure out the cost of the 100 shares not the 200 shares right so if i do that down here though and i say well if i bought 200 shares and i sold 100 then i'm just going to figure out the difference on a unit basis the gain on a per share that we sold and then multiply them by the amount that we sold so this would be a little bit more direct calculation for a gain or loss if that's the sole thing you're looking for the gain or loss calculation here it'll get you right there although again it could get muddied up a little bit if you have expenses on the price and and when to purchase them and when the sales take place so there is that