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.