What is the equity and balance on an investment account?

The equity on an investment account is the total monetary value less the manager's fees.

The balance of an investment account is the sum of all deposits and withdrawals to/from an investment account, taking into consideration the calculation of the manager's compensation. After the trading interval ends and compensation is paid out, the balance on the account will be equal to the equity.

Equity including the manager's compensation is the total value of all the investor's assets in investment accounts at the moment of the latest rollover.

Value Increase is a value showing the change to an investment account since it was opened, taking into consideration only the changes resulting from the manager's trading (excluding deposits and withdrawals).

Value Increase = Equity - Total Deposits to Investment Accounts + Total Withdrawals from Equity Accounts.

Example:

An investor makes a deposit of 1,000 USD to their investment account. Based on the manager's terms in their proposal, the investor will pay 50% of their share of the profits to the manager as compensation. After the amount was deposited, the balance and equity are equal to 1,000 USD. During the trading interval, 500 USD of profit is added to the investment account. In this case, the value of the compensation is 250 USD (50% of the profit), so the equity plus the manager's compensation is 1,500 USD, while the equity minus manager's compensation is 1,250 USD.

Compensation is paid to the manager at the end of the trading interval, after which the balance = equity = 1,250 USD.

How does the balance and equity change when money is withdrawn?

When a withdrawal is made from an investment account, both the balance and the equity decrease proportionally.

Example № 1:

The balance and equity of the investment account at the end of the trading interval and after compensation has been paid is 1,250 USD. The investor makes a request to withdraw 250 USD (20% of the equity), and accordingly each value falls by 20%. After the withdrawal, both the balance and the equity will be 1,000 USD.

Example № 2:

The balance on an investment account is 1,000 USD at the beginning of the trading interval. However, by the end of the trading interval, the equity has fallen to 500 USD. When the account makes a loss, the investor pays no compensation to the manager. So, the equity plus the manager's compensation is 500 USD. The investor decides to withdraw 100 USD, or 20% of the equity on the investment account. After the withdrawal, the balance, equity and equity plus the manager's compensation are 20% lower and are equal to 800 USD, 400 USD and 400 USD accordingly.

If there is a profit at the moment the withdrawal takes place from the investment account, then the manager receives their compensation.

Example:

A few weeks after the start of the trading interval the manager makes the investor a profit of 20%. According to the manager's proposal, their compensation is 50% of the profit. The initial investment made was 1,000 USD.

The balance of the investment account stays at 1,000 USD. The manager is entitled to half of the profit, which is 100 USD. The equity plus the manager's compensation has increased to 1,200 USD, and the equity minus the manager's compensation is 1,100 USD. The investor decides to withdraw 110 USD, which is 10% of the equity. This means that the values fall by 10%. The balance, equity and equity plus the manager's compensation will be 900 USD, 990 USD and 1,080 USD respectively. The manager will also get 10% of their compensation, which is 10 USD.

Please note that if the balance on an account falls below the minimum investment amount as a result of a withdrawal, the account will be closed.