Mutual Fund NAV

NAV or Net Asset Value is the sum total of the market value of the units in a Mutual Fund. As Mutual funds collect money from investors and invest it in the securities market whose value changes daily, the NAV for that Mutual Fund varies daily too. The NAV of a particular Mutual Fund is declared at the end of a trading day in conformity with the SEBI Mutual Fund Regulations.

1. What is a mutual fund NAV?

NAV is the denotation of the performance of a particular scheme of a Mutual Fund. The NAV is the representation of the price of per unit/ share of the mutual fund on a specific day and time.  Any financial entity dealing with the concept of assets and liabilities will have a NAV.

2. How is NAV calculated?

A NAV is calculated by dividing the market value of the scheme by the total number of units in the scheme.

3. What is the formula to calculate NAV?

For NAV calculation you need to divide the total assets by the total number of issues units. The NAV formula is (Assets-Liabilities)/ total outstanding units = NAV

For example:

The market value of a particular Mutual Fund Scheme is Rs 1 Crores. The Mutual Fund has issued 10 Lakhs of units for a price of Rs 10 each. In this case, the NAV of per unit of the mutual fund scheme will be Rs 10 (1 Crore/10 Lakh).

The market value of security keeps fluctuating through the trading day. Hence the NAV of a Mutual Fund is calculated at the end of a trading day.

4. Does NAV affect your mutual fund investment?

A lower NAV does not imply that the Mutual Fund comes at a cheaper price. The NAV simply tells you the current price of per unit of a Mutual Fund. You should not confuse the NAV with the market price. The NAV is more of book value and it will always remain that. What matters when you choose a mutual fund investment is its performance and the quality of the portfolio.

5. What is the difference between NAV and Market Price?

Every company on the stock market has its share listed on the exchange. The market price of these share keeps fluctuating as per the market movements. NAV, on the other hand, is just the daily price of a unit in a mutual fund. The stock prices may go high or low depending on the demand, whereas a NAV is independent of such demand. The NAV cannot be over or undervalued.

6. Why NAV is important to know the performance of a fund?

If the NAV of a particular mutual fund is high, then it might indicate that the mutual fund has performed well. Yet you should take other factors into consideration while deciding on which mutual fund to buy. You need to look at parameters such as the fund performance, investment objective, Exit Load, Expense Ratio and also the total experience of your fund manager who will take the responsibility of investing your money in the right mutual fund.

You can use the NAV to get an idea of the holding in your portfolio. A NAV helps you see whether your fund is increasing or decreasing in value.

7. Does NAV matter while buying a mutual fund?

As mentioned above, when you decide to invest in a mutual fund you need to look at its performance and quality and other such important factors. Mutual funds with a low Net Asset Value or a high Net Asset Value will also have other underlying factors for such results. You need to make sure you take a holistic view and only then take a final decision.