What is nav in mutual fund?
NAV, or Net Asset Value, is a crucial concept in the context of mutual funds. It represents the per-unit market value of all the securities held by a mutual fund scheme, minus the fund’s liabilities. In simpler terms, NAV is the price at which investors buy or sell units of a mutual fund.
Here’s how NAV is calculated:
- Market Value of Fund’s Assets: This includes the current market value of all the securities (stocks, bonds, and other financial instruments) held by the mutual fund.
- Liabilities: This involves any outstanding expenses or debts that the mutual fund needs to pay.
- Total Number of Outstanding Units: This represents the total number of units that investors currently hold in the mutual fund.
The NAV is calculated at the end of each trading day. When you decide to invest in a mutual fund, you typically buy units at the NAV. Similarly, when you redeem or sell your units, the NAV is used to determine the value of your investment.
It’s important to note that the NAV of a mutual fund doesn’t directly indicate the fund’s performance. Instead, it reflects the current value of the underlying assets in the fund. The performance of a mutual fund is better assessed through its returns over different time periods, expense ratios, and other relevant factors.