Using NAV to calculate portfolio performance

[d.o.g.]

I have a qn then. Looking at total returns, we have a +$1,000 return at the end of Month 2 right ($34,000 - $15,000 - $18,000)?
But the NAV reflects that there's a loss of 1%? How is this re-conciled?

NAV takes into account the fact that different amounts of money were at work for different amounts of time.

In month 2 the loss was 6.7% ($1k/$15k).
In month 3 the gain was 6.25% ($2k/$32k).

Compounding the 2 returns results in a final net decrease in NAV. Essentially you bought more units when the NAV was down, so even before NAV had returned to the original $1 you had already made some gains. This is equivalent to averaging down - your average cost goes down so you break even and start making money at a lower price point.