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Know The Key Features Of NAV In Mutual Fund


Net Asset Value (NAV) refers to a fund’s per share market value. It is the price at which the investors buy fund shares from the fund company and sell fun shares to the fund company. It is calculated by dividing the total value of all the assets and securities in a fund’s portfolio. NAV is only calculated once at the end of each trading day based on the market price of the securities.

For example, assume a mutual fund of ₹95million invested in a company and ₹5 million in cash, so the total value of the Asset is ₹100 million. The fund has liabilities of ₹10 million. As a result, the fun would have a total value of ₹90 million.

Some key features of NAV of the Mutual fund:

  • Net asset value formula (NAV) represents the fund’s per-share market value.
  • NAV is calculated by dividing the total value of all the cash and securities in a fund’s portfolio, minus liabilities by the number of outstanding shares.
  • NAV is very much important because it tells about the worth of the fund’s each share.

Value of mutual funds vs. value of stocks

The NAV pricing system for the buying and selling of shares of mutual funds differ significantly from that of stocks and equities, which is issued by the companies listed on the stock exchange. Company issue a limited number of equity shares through an Initial Public Offering (IPO), and sometimes additional offerings. And then they are traded on exchanges like the New York Stock Exchange (NYSE). The value of the stocks is based on the demand and supply or market forces.

While Mutual Fund’s value is determined by how much fund invested as well as expenses in running it and it’s outstanding shares. Although NAV does not give a performance metric for the fund. Because the Mutual Fund virtually distributes its income and generate capital gains on fund shareholders. However, a mutual fund can be better criticized by its total return; it includes how good the underlying shares have performed as well as any allowances paid.

Know the NAV calculated in mutual funds

Net asset value (NAV) is the market value of a fund per unit. … It is calculated by dividing the full value of all assets in a portfolio; subtract all of its liabilities. A fund’s NAV is calculated either by the mutual fund house itself or by a mutual fund recruited accounting company.

When the calculation of NAV mutual funds is: As the value of the underlying assets (say stocks) changes every minute, NAV calculation is impossible during business hours. After taking into account the closing market prices of securities held by the fund or scheme, NAV is calculated at the end of each market day.How crucial to investors is NAV: The NAVs are meaningless if the quantity of investment in separate systems is the same. What an investor needs to look carefully are the scheme’s returns.

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