How to Calculate NAV in Mutual Fund?

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How to Calculate NAV in Mutual Fund?

What is the Net Asset Value or NAV in Mutual Funds?

NAV stands for Net Asset Value. It represents the per-unit market value of a mutual fund. NAV tells you a mutual fund's per-share market value, helping you see how well your investment is doing. It makes buying and selling mutual funds clear and fair.

If you're looking to enhance your investing skills, a great next step is learning how to select the best mutual funds in India.

The starting price of mutual fund units often begins at ₹10, and can rise as the assets in the mutual fund grow. Typically, a higher NAV in mutual funds indicates a more popular and well-performing fund.

NAV, or net asset value, is especially crucial for open-end funds. Unlike other investments, in these funds, interests and shares aren't usually traded among shareholders.

By understanding the NAV of mutual funds, investors can gauge the performance of their investments, helping them decide whether to continue or withdraw from a particular fund. This makes NAV a vital reference point in managing one's investment portfolio. Also, knowing your mutual fund options is key if you're thinking about a lump-sum investment. Dive into our quick read, "Best Mutual Fund for Lumpsum Investment," to explore the three main types of mutual funds.

So, how do we calculate the net asset value (NAV) in mutual funds? Why is NAV calculation important, and when is the net asset value calculated? Let's find out!

How is NAV Calculated?

The Net Asset Value (NAV) in mutual funds is a clear indicator of a fund's performance, calculated with this straightforward formula:

NAV = (Assets – Liabilities) / Total Shares

Let's break down these components:

1. Assets: This includes the fund's investments like stocks and bonds, cash on hand, money owed to the fund, and other earnings. The value is determined using the closing prices of the securities in the fund's collection. It also counts liquid assets, dividends received, and interest payments.

2. Liabilities: These are the fund's outstanding payments, amounts owed to lenders, and other related expenses. It can include accrued expenses like management costs, staff salaries, and other operational charges.

3. Total Shares: This represents the sum of all shares or units held by investors in the mutual fund scheme.

Mutual funds either have an in-house team or hire fund accounting firms to determine the NAV. Furthermore, to maintain transparency, SEBI mandates mutual funds to update their NAV on AMC & AMFI websites every business day.

Looking for up-to-date NAV info? Visit INDmoney's Mutual Funds page. Log in to view mutual fund details, including NAV, and use the calculator to estimate returns and find the best fund for your investment.

When is NAV Calculated?

NAV isn't calculated during stock market hours because the prices of the underlying securities fluctuate continuously. Only after the trading day concludes, can the NAV be accurately determined. This ensures the value of the assets is based on the closing prices of the securities for that day. So, while the stock market is bustling with activity, the NAV remains static, awaiting the closing bell to get its updated figure.

For instance, a mutual fund worth ₹100 crore today might increase to ₹120 crore tomorrow if the market does well, reflecting in the NAV. So, keeping track of the NAV over time gives you an insight into how well the fund is performing.

What does a High or Low NAV in Mutual Funds Indicate?

A high NAV in mutual funds means you get fewer units for your money, while a lower NAV lets you buy more units.

If you invest ₹1,00,000 in a fund with an NAV of ₹10, you get 10,000 units. But with an NAV of ₹50, you'd only get 2,000 units. Regardless, if the value of both funds grows by 10%, your investment becomes ₹1,10,000 in both cases. So, the NAV doesn't really dictate the potential return on your investment.

Note for Mutual Fund Investors: Always complete the one-time KYC process before investing. Ensure you invest in registered mutual funds, which can be checked on the SEBI website under 'Intermediaries/Market Infrastructure Institutions.'

Key Takeaways

  • NAV or Net Asset Value shows the per-unit value of a mutual fund.
  • You can calculate NAV by using this formula: NAV = (Assets – Liabilities) / Total Shares (Subtract Liabilities (what it owes) from Assets (what it owns); divide it all by the total number of shares.
  • You can find the updated NAV at the end of each trading day based on the closing prices of the investments in the fund.
  • Whether a NAV is high or low doesn't change how much money you could make. It just affects how many units of the fund you can buy.
  • Mutual funds are required to share their NAV every day so investors can always know the current value of their investments.
  • Before investing, ensure you have completed the KYC process and checked that the mutual fund is officially registered.
  • You can find the latest NAV and other details about mutual funds on platforms like INDmoney.
  • What is NAV formula?

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  • What is the significance of net asset value in mutual funds?

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