NAV in Mutual Funds

Discover the ins and outs of how NAV works, and gain a deeper understanding of how it impacts your investment returns in mutual funds.
Net Asset Value (NAV)
4 mins read
02-June-2024

The Mutual Fund's scheme performance is indicated by its Net Asset Value (NAV), representing the market value of its held securities. Funds invest investors' money in securities markets, and as the market value of securities fluctuates daily, so does the scheme's NAV. Calculated as the market value of securities divided by the total number of scheme units, the NAV per unit determines the value of each unit on any given date. In this article, you will learn about NAV meaning, NAV formula, NAV calculation and many more in detail.

What is NAV?

NAV full form is Net Asset Value. It is a fundamental metric used to assess the value of a mutual fund. It represents the per-unit value of the fund's assets after deducting any liabilities. Essentially, NAV indicates the price at which investors buy or redeem mutual fund units.

How NAV works?

NAV is calculated at the end of each trading day. The formula is simple: divide the total value of the fund's assets by the total number of outstanding units. This calculation takes into account the market value of the mutual fund's holdings, including stocks, bonds, and other securities, as well as any accrued income and expenses.

What is NAV in mutual funds?

When you invest in a mutual fund, you are essentially buying units of the fund. The price that you pay for each unit is the NAV of the fund.

For example, if the NAV of a mutual fund is Rs. 100, you will pay Rs. 100 for each unit of the fund.

The NAV of a mutual fund is important for mutual fund investors because it determines how much money you will get when you sell your units. If you sell your units when the NAV is higher than the price you paid for them, you will make a profit. Conversely, if you sell your units when the NAV is lower than the price you paid for them, you will make a loss.

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Frequently asked questions

How to check NAV of a mutual fund?

You can check a mutual fund's NAV in financial websites like Bajaj Finserv Platofrm, or directly from the asset management company. It's updated daily.

What affects the NAV of a mutual fund?

NAV is affected by the fund's underlying asset values, expenses, income, and changes in the number of outstanding units. Market fluctuations and fund performance also play a role.

What does NAV mean?

NAV, or Net Asset Value, represents the per-unit value of a mutual fund, determined by dividing the total value of all its assets by the number of outstanding units.

What is the new rule on applicable NAV?

According to the recent regulation introduced on February 1, 2021, AMC will allocate mutual fund units on the same day if the payment is settled in the bank account within the specified cut-off time. This regulation is applicable to all mutual fund schemes, irrespective of the invested amount.

Is NAV calculated daily?

Yes, NAV is calculated daily at the end of each trading day, reflecting the current value of the mutual fund's assets and liabilities.

What is a good NAV for a mutual fund?

There's no single "good" NAV for a mutual fund. A high NAV simply reflects the total value of the fund's assets per unit. Focus on the fund's performance history, expense ratio, and alignment with your goals.

Is high NAV good or bad?

A high NAV doesn't necessarily indicate a better fund. A newer fund might have a lower NAV than an established one, but both could offer similar returns.

What is the NAV formula?

NAV = (Total Assets - Total Liabilities) / Number of Outstanding Units

How much NAV is good in mutual funds?

NAV is more about affordability than quality. A lower NAV might allow you to purchase more units initially, but investment decisions should prioritize factors like long-term growth potential.

What if NAV is low?

A low NAV doesn't inherently mean a bad investment. Consider the fund's overall strategy and track record. A low NAV could be an opportunity if the fund is on an upswing.

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