How is fund performance chart created?

the fund performance chart does not represent NAV price trend. How do I read this chart? Sometimes the value of the Nav price is way low and still the performance is showing performance is above the NAV price...

Fund performance is based on an investment of "x" dollars made on fixed point in time and its calculation includes capital gains/losses, dividends, interest paid for that investment over a period of time.

Remember also that the NAV is the value of the assets of the fund divided by the number of units outstanding, so that if the fund is issuing shares are dividends or as the denominator increases, the NAV may change but the value of the assets may be growing.

So, if you bought $1000 worth of a mutual fund on 1-Jan-2007 and the NAV was $100 and you had 10 units and are issued 0.5 units as a dividend, but the NAV remains at $100, your holdings are now worth $1,050. If this is what the value of the holdings are at year end, your performance is 5%.

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