Home Discover Journals What is NAV in mutual funds? Everything you need to know

What is NAV in mutual funds? Everything you need to know

By Finserv MARKETS - Oct 15,2019
Views Icon807 Views 0 0 Comments

What is NAV in mutual funds? Everything you need to know

If you are not content merely saving some amount of money every month but looking at wealth creation over the long-term, you have by now been told that taking the mutual funds investment route is the ideal option. Before investing in mutual funds, it is ideal that you assess your financial goals, and decide how much of a risk you are willing to expose your money to. At the next stage, you would need to ascertain the best mutual funds for investment.

For the uninitiated, mutual funds are essentially a pool of money collected from several investors, which then is invested in shares, bonds and stocks. Fund managers handle this investment based on an individual investor’s risk appetite and financial goals. Any individual can invest in a direct mutual fund by going online and filling in a form and uploading requisite documents. The Securities and Exchange Board of India (SEBI), which is a regulator of mutual funds broadly lists types of mutual funds into debt, equity, hybrid and solution-oriented categories.

An increasing number of Indians are looking at the types of mutual funds to invest. Reports1 point to an addition of 44.2 million folios between March 2014 and June 2019 in India’s mutual fund industry.

mutual fund

(Source: Livemint2)

As your mutual funds investment research starts to broaden, you will need to learn how to track the performance of your fund, and see how it matches up to your expectations. Investing in mutual funds, available on Finserv MARKETS, ensures opening an account is hassle-free, efficient and speedy.

One of the terms you will come across the term NAV. What exactly is a NAV and what is its role in the mutual fund picture?

Read on for everything you need to know about an NAV in mutual funds.

1. What is NAV

NAV is an acronym used for net asset value. Simply put, it is the price at which investors buy and sell fund shares from a fund company. It is representative of the per unit market value of a fund.

2. How NAV is calculated

The basic formula to calculate NAV is the total value of all assets in a fund’s portfolio minus liabilities divided by shares outstanding. All assets mean the total of the current market value of all securities held in the portfolio. This is both in the form of cash and accrued income.

mutual fund

(Source: wallstreetmojo.com)

3. When is it calculated

The NAV per share is calculated once each day, on the basis of the closing market prices of the securities in the fund’s portfolio. The NAV is calculated at the end of every market day. It is not possible to determine NAV before that, simply because the price of holdings is constantly changing.

By opting to invest in mutual funds, available of Finserv MARKETS, you also gain from professional expertise and advice on the types of mutual funds, and exclusive offers based on your risk profile and investment/financial goals. Portfolio summaries and insights will also come your way making investment a breeze.

4. What is the difference between NAV and price of an equity share

Buying mutual fund units at NAV means you are buying at book value. The concept of market value of a fund simply doesn’t exist, when it comes to mutual funds. On the other hand, when you buy shares, apart from fundamentals, the price is dependent on the vagaries of demand-supply and also analysts’ forecasts. A stock’s market price and book value are two different things.

5. What does it mean to have MFs with low or high NAV

Let’s consider this – You invest in two mutual fund schemes, A and B. Scheme A has a NAV of Rs 10, while Scheme B’s NAV is Rs 50. You decide to invest Rs 1 lakh in both schemes. On the face of it, you feel scheme A is cheaper, because you have 10,000 units, while scheme B fetches you only 2,000 units. Next, imagine that both the schemes give you a return of 10 per cent after a month. This means that the NAV of scheme A is Rs 11 while that of scheme B is Rs 55. For both schemes, your investment value is Rs 1.1 lakh. This shows that NAV price is not exactly important when it comes to judging or picking the best mutual funds.

The NAV does not provide you the metric for performance of a specific fund. It is helpful for you to calculate how many units you can buy if you have a certain amount earmarked for mutual funds investment.

In conclusion, investing in different types of mutual funds means understanding how every aspect of the fund works. Judging a fund purely on the NAV is an exercise in futility because a fund can be good or bad, irrespective of whether a NAV is lesser or higher. Choose a fund on the basis of how it has performed historically and how well it has been managed. Never lose sight of your financial goals (short or long-term) and invest in a fund to match your goal. Opting for funds, available on Finserv MARKETS, means you can choose from among the best mutual funds in the country.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!


Connect with Us
Connect with Us

Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522