What is NAV?
The full form of NAV is – NET ASSET VALUE and the Hindi meaning of NET ASSET VALUE is – Actual Value of Total Assets,
Today we are going to talk about NAV here in the context of MUTUAL FUND, what is the meaning of Mutual Fund NAV, what is the use of NAV in Mutual Fund, how NAV is calculated, and also we will know what is Mutual Fund NAV. Is it important?
What is MUTUAL FUND NAV?
MUTUAL FUND NAV is the number that comes from dividing the total amount of total assets, shares, bonds, and CASH deposited in a fund’s portfolio by subtracting the total LIABILITIES of that fund from the total UNITS of that fund. It is called NAV(NET ASSET VALUE) of that fund.
NAV is also called the Book Value of the Mutual Fund.
And just as the book value of his Mutual Fund changes, similarly its NAV also changes.
The reason for the change in NAV or book value of a mutual fund is the daily change in the stock market price of the stocks in which the mutual fund invests.
And in this way, as soon as there is a change in the value of the total assets of the mutual fund, in the same way there is a change in the price of NAV,
USE OF MUTUAL FUND NAV
NAV is the unit price of a mutual fund, the UNIT we get by investing in a mutual fund, the PRICE of a UNIT is determined by its NAV,
And in this way, to know the CURRENT VALUE of the total amount invested in a mutual fund by an investor, the NAV price of that MUTUAL FUND and the total UNIT are multiplied (MULTIPLY),
Like – suppose if I have invested Rs 10000 in mutual fund till now,
And instead I got 100 units, and today the NAV of that mutual fund is Rs.105,
So in this way the CURRENT VALUE of the total mutual fund investment made by me will be-
TOTAL VALUE OF MUTUAL FUND = (NAV) x (TOTAL UNIT)
And thus my investment value will be = (105) X (100) = Rs 10,500,
In this way, the amount of profit from mutual fund will be 10500 – 10000 = profit of Rs.500.
Thus, NAV is the current price of a unit of a mutual fund,
And with the help of this NAV, the value of investing in Mutual Funds and the benefits earned on it are compared.
DIFFERENCE BETWEEN MUTUAL FUND NAV AND STOCK PRICE
There is a big difference between NAV and STOCK PRICE of mutual fund that-
STOCK PRICE is the MARKET PRICE of that stock, whereas NAV of a mutual fund is the BOOK VALUE of that fund,
That’s why don’t consider NAV of mutual fund as any stock price,
And also keep this in mind that there is no comparison between the NAV PRICE of two different mutual funds, there is no relation between the two.
While the stock price of two companies operating in the same industry can be compared, because the stock price always refers to the market price,
Another biggest difference between mutual fund NAV and stock price is –
Stocks are always bought and sold at market price, irrespective of their book value, whereas the NAV of a mutual fund is its book value, and units in a mutual fund are always bought or sold at book value.
Calculation of Mutual Fund NAV
As we have seen above, the calculation of MUTUAL FUND NAV is very simple –
After deducting the total liabilities of the mutual fund from the sum of all the assets of the mutual fund, the amount that comes has to be divided by the total units of the mutual fund.
NAV= (TOTAL ASSET OF MUTUAL FUND) – (TOTAL EXPENSES AND LIABILITIES OF MUTUAL FUND) / (TOTAL UNIT)
By mutual fund assets, we mean the sum total of the portfolio created by the mutual fund, which includes all stocks, bonds and cash.
Whereas the liabilities of a mutual fund include the aggregate of all expenses and other liabilities of the mutual fund,
Importance of Mutual Fund NAV
NAV is important in buying and selling of mutual funds, on the basis of NAV the profit and loss of mutual funds is calculated,
Also NAV is used for CURRENT valuation of mutual funds,
HOW TO CHECK NAV ONLINE
Now if we talk about how to check Mutual Fund NAV online, then you can also check it on the website of Mutual Fund Scheme,
And also it can be checked on some other MONEY and FINANCE related website as well,
The main website to check mutual fund NAV is –