: All you need to know about Mutual fund NAV #IndiaNEWS #Business Here is a guide to the NAV (net asset value) of a mutual fund, helping you understand this core component better before investing.

All you need to know about Mutual fund NAV #IndiaNEWS #Business
Here is a guide to the NAV (net asset value) of a mutual fund, helping you understand this core component better before investing.
What Exactly is NAV?
Understanding the NAV (net asset value) of a mutual fund is very important for any investor. The NAV is the market value of all the securities that are held within the mutual fund plan at any given point of time. The performance of the mutual fund plan will be indicated by the Net Asset Value or NAV in this case. Whenever you are checking out the top funds from any sector, say best HDFC SIP mutual funds from banking sector or any other options, you should check the NAV as well.
You can work out the per-unit NAV of any mutual fund through the division of the market value of the mutual fund’s securities, by its total unit count for any particular date. The NAV is the price that is paid for mutual fund units (per unit). Usually, the cost per unit begins from Rs. 10 and keeps increasing, with the increase in assets under management (AUM) of the mutual fund. A lower NAV (net asset value) does not always equate to a more affordable fund. The NAV formula is the following-
Total assets (-) total liabilities / total number of outstanding units.
Why the NAV matters
Here are some pertinent points to keep in mind in this regard:
1. You should not emphasize only on the NAV of a fund.
2. Refrain from choosing a fund only because of a lower NAV. This is no indicator of the future potential of the fund.
3. The NAV of a fund may differ from a share’s market price. You will find the latter influenced by the overall equation between supply and demand, and also views/forecasts of industry analysts on a company.
4. Mutual fund demand is not influenced by the NAV. You will be purchasing units of mutual funds at their book value and the NAV is chalked out at the end of each day by the AMC (Asset Management Company).
Understanding NAV Better
Suppose the NAV of a mutual fund stands at Rs. 600. Hence, with a corpus of Rs. 12,000, you can purchase 20 units of the mutual fund in question. Suppose you invest a sum of Rs. 1 lakh in a mutual fund with NAV of Rs. 10. In this case, you can expect to own 10,000 units of the mutual fund. The NAV is calculated by all funds at the end of the day, post market timings. All outstanding expenditure and liabilities are subtracted for getting the net asset value, with the formula mentioned above.
Many investors mistakenly feel that NAV equates to something like a stock/share price. This makes them think that a lower NAV is advisable for investing in mutual funds, since they can pick up more units of the same. However, a lower value does not always make any fund the best pick.