Every trader must know basic stock market terminologies. One such term you should comprehend is net account value.
What is net account value? How is it different from the market value? Find out in this article.
The net account value is the total worth of all the holdings in your account, including cash and securities. It is also known as total equity. Some of the factors that may cause your net account value to move up or down are industry changes, significant events like a pandemic, and changes in interest rates.
Such factors may cause your investment portfolio to move up or down. They can influence the price of assets such as stocks, bonds, cash, and cash equivalents, including exchange-traded funds (ETFs).
To calculate your net account value, you should add to the total amount of cash in your account and the current market value of the securities. Then, subtract the market value of any stocks you have shorted or borrowed shares that you sold to other investors.
Your net account value is essentially the worth of holdings or contents of your portfolio if they were to be liquidated at a point in time. Meanwhile, market value is what your holdings are currently valued.
Market value is the price your portfolio would fetch in the marketplace. This is the investment community’s value to your holdings, including all your assets.
This is determined by multiplying your account’s outstanding shares by the current market price.
Market value is easy to identify for exchange-traded products, including stocks. Their market prices are readily available.
Meanwhile, over-the-counter instruments such as fixed income securities are difficult to decipher since the trades are made without a central exchange or broker.
The trickiest market value to determine is illiquid assets or stocks that cannot readily be sold without substantial loss in value. One example is real estate.
To assess this, you will need to utilize the services of appraisers and business valuation experts.
Market values are dynamic in nature. They depend on various factors, from the changing aspects of supply and demand to the economic climate.
Hence, you should not be concerned if your net account value and market value do not always match if you are new to stock trading.
Etrade and Webull are trading platforms. Both are accessible brokers specializing in different trading aspects.
Etrade is the more decisive choice for a beginner investor since it offers excellent educational resources for research and data. Webull is primarily aimed at intermediate and active traders.
Whichever platform you use for your stock trading, you should take note of the potential influences that may affect your net account value.
This way, you can shape your investment portfolio to complement your trading goals and risk tolerance.
Asset prices move – this is a fact for traders. Often, there is no clear explanation of why they change over short or long periods.
One of the common reasons is a broader economic trend or company-specific events. Sudden deviations may cause your equities to fluctuate.
A thriving economy means stocks will likely rise, while a struggling market sees stocks downsizing.
For individual companies, events such as organizational changes, acquisition announcements, and earning reports may drive share price changes.
Significant events such as pandemics and international conflicts may shake up the stock market. Due to future uncertainties, investors tend to get their hands on safe assets such as bonds and gold.
Likewise, industry changes may also affect your net account value. If a particular sector performs, investments will pour down, and stocks will usually rise.
For instance, the retail industry will benefit from increased consumer spending while the home budling stocks will likely suffer if the housing market is struggling with sales.
With most industry trends, not every company will react nor be impacted in the same way. Nonetheless, these changes will bear upon the securities basket in that specific sector.
Your net account value is also directly affected by monetary policy decisions. When the changes in guidelines, interests rates will likely increase. In turn, bond prices will decline.
You should plan accordingly if you decide to sell bonds before they mature or if you opt to reinvest the promised clash flows back into the market. Factoring in the potential interest changes is vital in this regard.
Stocks may also be affected by monetary policies. This may be a tailwind when interest rates are cut or a headwind when there are reduced asset purchases.