Understanding Mutual Fund NAV While Investing

by otopenews

Mutual funds are an attractive avenue for investing your surplus cash. They are affordable and they also promise good returns in the long run. Moreover, there are various types of mutual fund schemes which you can choose as per your risk preference. The growth of a mutual fund scheme is measured by the change in its Net Asset Value (NAV). NAV is a very important concept in mutual fund investments that should be understood if you are investing in a scheme. Do you know all about mutual fund NAV?

No? Let’s understand.

What is NAV?

NAV is the short form of Net Asset Value. NAV represents the ‘per unit’ cost of a mutual fund scheme. It is calculated as follows –

NAV = (total value of the mutual fund portfolio – liabilities and expenses of the scheme) / total number of units

Net Asset Value Definition

Understanding Mutual Fund NAV

When you invest money in a mutual fund scheme, it is pooled together with the money invested by other investors. From this pooled investment, the expenses and liabilities are deducted to arrive at the net investments. This investment is, then, used by the fund manager to buy stocks, shares, bonds or securities of various companies and institutions. The different investment made by a mutual fund manager represents the total portfolio of a mutual fund scheme. This value is then divided by the total number of units purchased to arrive at the Net Asset Value (NAV).

Understanding of Mutual Funds NAV

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