Net Asset Value in Mutual Funds

There come different financial terminologies when you invest in mutual funds. Net asset value or NAV is one among them. In simple words, NAV is the price per unit of the mutual fund. It is the price on which the mutual units are purchased and sold in the market. Even though most of the investors don't give utmost importance to this value, you can have a look at NAV to understand about the performance of the mutual fund that you have purchased or intended to purchase.

NAV calculation

It is not a complex task to calculate NAV. Online portals give you nav formula which is so simple to calculate. It is calculated by dividing the difference between the value of asset and liabilities by the number of outstanding shares. The net value can change in accordance with the change in assets and liabilities.

NAV is not the stock value

NAV is not the stock value. The shares should be made available on the stock market and the cost of the share is the same as the value given at the stock market. The share price is also determined by factors like the potential of the company and demand and supply. Hence the NAV is always different from the stock value. Now there are several online mutual fund platforms to provide you with detailed information on the stock and net asset value to enhance your knowledge on the same.

Daily calculation

Portfolio worth is estimated by all of the mutual companies with the closing of the stock market at 3.30 PM every day. The next day market opens with the closing share price of the previous day. Asset management companies or fund houses deducts expenses and payables and calculates the NAV using the formula mentioned above.

Easy to get the reports

Now, the reports of closing stock are readily available online. There are several online platforms to bring these reports to both big and small screens. NAVs are calculated by the asset management companies within a short time to stock market closing to provide the same for the intended investors.

Investment timing net value

Latest NAV is released by the mutual fund companies on all working days and is strictly time-bound. So investment time affects net asset value calculation. This is the reason why mutual funds keep 2 PM as the deadline for investment. NAV of the investments made before 2 PM will be reflected on the same day reports and those made after the deadline will only be reflected next business day's report.

NAV is not an indicator of performance

Keep in mind that NAV is not the perfect indicator of mutual fund performance. A lower NAV doesn't make the fund a better investment product and vice versa. But NAV is one of the most important values that give a clear picture of how the fund performs every day.

If you need to know more about nav formula, it is better to make use of the service of the reputed online mutual fund platform. These portals provide a complete range of services online to make you free from paper works. Learn more at Gulaq Mutual Fund Blog

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Created on Jul 2nd 2019 01:23. Viewed 456 times.

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