What is Mutual Fund NAV? How to calculate NAV? High NAV vs Low NAV

By | January 29, 2018

What is Mutual fund NAV?

The net or NAV of the mutual funds means the total assets value , or the net expenses  of a unit that will be calculated by asset management company when business day ends.

NAV of any amount on a particular date is the symbol of the value that an person who has invested will get for all the unit by the person in terms of dissolution of the case on that specific date.

mutual fund

mutual fund

In easy terms, you can say that the NAV is per unit price of fund. As there is a price for the stock shares, mutual funds also has a net value for the assets. The investor those except to get one share per unit of  mf is able to purchase it a rate same as NAV price. The main difference between mf NAV and stock prices is that stock prices value changes in the span of a day but NAV remains the same.

The total value of the assets will be updated at each days end. Therefore the investor who purchase fund listed, which buy NAV is the fund NAV that was updated on last business day. The mf that one purchase on the present day will be declared after NAV gets updated is closed for the present day. And for this problem most of the buyers are unknown of the NAV rate when selling and buying units of mutual fund.

Take for a example, if anyone want to purchase ABC mutual fund just for Rupees 10000 and NAV was closed on rupees 10 on the previous day business, then it indicates that you can purchase 1000 units. If there are any kind of rise in the value of the  NAV price on the business you purchase it , then this indicates that now you have to pay 10000 or more for 1000 shares. For this reason the point of selling and buying in terms of rupees is available instead of the units.

How to Calculate NAV?

Mutual fund NAV is the price or cost through which particular fund shares are purchased and sold. In real life the amount in the market of a mf after the deduction of the market funds.

In a trading day the portfolio of the share of any mutual fund is being calculated and there is also a deduction of expenses. The result shown is divided by adding every shares and then the last value remaining is the total asset value. That’s why the NAV is sometimes known as the net value of the book or the book value.

Here are the proper information of how to calculate NAV of mutual fund.

The mutual fund assets are being categorised in two parts one is security and the other is cash. The security part is made up of bonds and stock. Thus at market value the overall value of the mutual funds assets will include stocks, bonds and cash. Stocks and debentures market value is actually the price of closing on a exchange as it was listed. The total assets include dividends, interests and and the assets liquid. Cash that are owned to creditors are included in this calculation.

Below is the formula of NAV mutual fund computation:

(NAV) Net Asset Value = (Assets – Debts) / (Number of the Outstanding units)

  • Assets = The Receivables + The accrued income + Market rate of mf investment
  • Debts= accrues expenses + liabilities

Mutual fund NAV is counted by some of the AMCs and private accounting firms. How the stock market is performing is the main depending factor of the mutual fund, when the exchange is closed the NAV is declared. According to SEBI guidelines all the mutual funds need to declare their total assets value on the trading day.

One must keep in mind that the ratio of mutual fund has to be deducted to get NAV result. The ratio of expanses is incurred by yearly fund with the audit money, agent transfer fees, distribution and marketing expenses, custodian fees, operating costs and management fees.

High NAV vs Low NAV:

Many investors might think that which investment is better option, investment in mf with a low NAV or that with a high NAV.

There is a unchanged all around investment within two mutual funds accompanied by same portfolios, there will be lower amount of shares if you have a higher NAV but the less NAV will provide you with high amount of shares. The number  of fund share in both the cases remains identical.

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