NAV is the unit price of a mutual fund scheme. A mutual fund scheme computes the market value of its securities daily once the market hours end. The Asset Management Company (AMC) will deduct all the expenses as well as outstanding liabilities to find out the NAV of the
day.
So, how to calculate NAV in mutual funds?
Here’s the formula:
Net Asset Value = (Total Assets of the fund – Total Liabilities of the fund) / Total Number of Outstanding Units
We’ll use an example to understand this better-
If you want to invest ₹10,000 in a fund with a NAV of ₹10, you will be allotted 1000 units. If you decide to invest ₹30,000 in another mutual fund scheme with a NAV of ₹20, you will receive 1500 units of the mutual fund.
What is the difference between market value and NAV?
The market value of a share depends on the demand and supply and an analysis of its future performance. On the other hand, an NAV is a price at which investors buy mutual fund units. An AMC determines the fund’s NAV at the end of the trading day.
When is the value of a mutual fund’s NAV updated?
Every mutual fund scheme updates the value of its NAV at the end of a trading day. The Securities and Exchange Board of India (SEBI) has made it compulsory for mutual fund companies to update the values of their respective NAVs.
What is the difference between NAV and AUM?
A company’s Assets Under Management (AUM) are the total number of assets the mutual fund controls, including its liquid assets. Meanwhile, a mutual fund’s NAV is the price of each unit of the mutual fund.