Comparte Capital Investment

What is NAV of mutual fund

Understanding NAV helps you to be a better investor.

The Net Asset Value (NAV) is irreverent when your amount of investments in different schemes is the same.


If you are a mutual fund investor, you may have heard of the phrase, Net Asset Value (NAV). Even you may see it next to your mutual fund whenever you buy or sell your shares. But do you know what NAV is? Understanding NAV helps you to be a better investor. It is the book value or net worth of the mutual fund based on the closing holdings of the investment. In short, it is the value of the per-share market value of a fund. The NAV calculation is important for mutual funds because it tells the value of one share of the fund.  This article helps you to understand more about NAV and its importance in mutual fund transactions.

How the mutual funds structured

In order to get a clear picture of NAV, it is wise to know how mutual funds get structured. Mutual funds are pooled funds, and the fund managers invest the money collected from various investors into different assets like shares and bonds. The pricing system of NAV is for buying and selling the shares of mutual funds which is entirely different from that of the common shares. A mutual fund holds stocks, bonds, and other securities as investments and trades them throughout the day. The value of these assets usually fluctuates based on the trading activity. The price of a mutual fund gets registered at the end of the day with the Securities and Exchange Commission at the NAV.

What is NAV

Net Asset Value (NAV) is a common term in Mutual funds which is the market value per unit of a fund.  You buy fund units from a mutual fund company and sell it back to them at this price.  In order to calculate NAV, you need to find the total value of the assets in your portfolio, and then minus the liabilities from this value. A mutual fund house itself or the accounting firm hired by the fund house calculates the NAV of a fund.  The price of the stocks changes every minute during the market hours, and it is impossible to calculate the NAV during that time. It is calculated at the end of the trading day to determine the value for the mutual fund’s transacting units. An investor can check the net asset value of his or her shares from daily to monthly and annually.


Importance of NAV for investors

The Net Asset Value (NAV) is irreverent when your amount of investments in different schemes is the same. Investors usually consider only the returns given by each scheme. The difference in NAV is not relevant when all other things remain constant of two different schemes with an identical portfolio as long as both the schemes can earn the same returns. You may see changes in NAV daily which means a rise or fall in the assets of the scheme. Normally, financial planners consider NAV of a scheme, and they do not explain it to their investors. Instead, they select the best mutual fund scheme that fulfills the financial objectives for their investors. Investors usually look at their returns of a fund over various time frames in order to assess its performance.

Many investors buy individual stocks, but they find difficulty in investing in mutual funds. The reason is mutual funds sell differently than stocks. The price of stock changes constantly during the trading hours depends on some factors like supply and demand. The price of mutual fund shares based on its Net Asset Value and investors buy and sell their funds based on this price.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh