NAV stands for Net Asset Value. It is the value of each unit of a mutual fund scheme. It is calculated by dividing total value of assets that are held by the scheme of mutual funds, without liabilities, by the number of units outstanding.
A mutualfund NAV Value is calculated at the end of each working day. It is based on the closing prices of securities that are held through the program. The NAV of a mutual fund therefore is a representation of the market value of the mutual fund’s underlying assets.
For example, if the total value of the assets owned by the mutual fund scheme is Rs. 100 crore, and the total number of units outstanding are 10 crores, the NAV in the scheme will be at least Rs. 10 per unit.
Investors use the NAV to gauge what their investment in mutual funds is doing. A higher NAV signifies that the fund’s underlying assets have increased in value, whereas the lower NAV indicates a decline in value for the underlying assets. It is vital to remember however that the NAV does not consider any expenses or fees charged by the mutual fund such as management fees or transaction costs.
The value of the NAV (Net Asset Value) of mutual funds calculates the NAV by divising the net assets for the mutual fund in proportion to the amount of units in circulation. The steps needed to calculate your NAV that a fund has:
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Determine the value total of the assets of the mutual fund: This includes the market value of all the bonds, stocks, and other securities that are held by the mutual fund in addition to any cash equivalents or cash.
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Take out any liabilities These include any costs or fees due by the mutual fund such as management fees, administrative costs, as well as other costs.
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The net asset is divided by the amount units remaining This gives you an estimate of the NAV per unit of the mutual fund.
For instance, if the mutual fund’s assets are net of 100 crore, or Rs. 100 crore and the total number of units that are outstanding are 10 crores, then the Net Asset Value per unit (NAV) of the mutual fund would be the amount of Rs. 10.
NAV = (Total value of assets – the total value of liabilities) NAV = (Total value of assets – Total value of liabilities) in outstanding
It is crucial to remember it is important to note that NAV of a mutual fund is calculated at end of each business day, based on price at which the fund’s securities are sold owned by the scheme. It could fluctuate depending on fluctuations in market prices and valuation of fund’s underlying assets.
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