What is the Mutual Fund’s Net Asset Value (NAV)?

26 Oct 2023

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What is the Mutual Fund’s Net Asset Value (NAV)?

Net Asset Value (NAV) is a financial metric used in the context of mutual funds and investment companies. It represents the per-share value of the fund's assets minus its liabilities. It is calculated daily and helps investors understand the current worth of their investments.

How is NAV calculated?  

The NAV is calculated by dividing the total value of the fund's assets (securities, cash, etc.) minus its liabilities by the total number of outstanding fund shares.

NAV = (Total Assets - Total Liabilities) / Total Outstanding Shares

For e.g. if a mutual fund has Rs 100 crores in assets, Rs 50 lakhs in liabilities, and 1 crore units outstanding, the NAV would be:
Rs 100 crores – Rs 50 lakhs / 1 crore units = Rs 99.5 per unit. This represents the price at which investors can buy or sell units in the fund.

Difference between NAV and stock price

NAV Stock Price
NAV reflects the underlying asset's value in a mutual fund Stock prices depend on market demand for the company's shares throughout the trading day.
NAV is determined once daily after the market closes. Stock prices change constantly during trading hours, allowing investors to buy or sell shares.

Investors often confuse NAV with stock price when investing, but they serve different roles.

To invest wisely in mutual funds consider

  • Performance
  • Fund manager experience
  • Underlying investments

Consider using SIP to average unit costs over time due to NAV fluctuations.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. The information provided is generic in nature and is for informational purpose only. Please consult your financial advisor before taking any decision.

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