For NAV all you need to understand is that the Net Asset value is the net value of the entity, which is calculated by summing up all the assets of the company and subtracting the total liabilities from it. All those who wish to invest in the mutual fund of a company considers it before investing as it shows the shares/units of the funds registered with the Securities and Exchange Board of India (SEBI) are traded (invested or redeemed).

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NAV all the steps to calculate

While going for selection in a mutual fund for investments, remember that daily changes in NAV don’t matter. Instead, go for the annualized return of a fund over different time frames to estimate the performance of the fund.

NAV = (Assets – Liabilities) / Total number of outstanding shares

Remember to include correct qualifying items in the liabilities and assets of a fund.

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NAV all that matters about mutual funds

Not like its counterpart (stocks), mutual funds don’t deal on a day to day basis, but they are priced based on their assets and liabilities.

The asset column of mutual funds includes the total market value of the fund’s investments, cash and cash equivalents, receivables, and accrued income. The market value is calculated once per day based on the closing prices of the securities held in the fund’s portfolio. As the fund may have a certain amount of

The liabilities column of the mutual fund is made up of the money owed to the lending banks, pending payments, and a variety of charges owed to various associated entities. In addition to this, it includes foreign liabilities that could be the shares issued to non-residents, income or dividend for which payments are pending to non-residents, and sale proceeds pending repatriation. All the amount due could be further categorized into short term/long term liabilities, according to the payment horizon. Staff salaries, utilities, operating expenses, management expenses, distribution and marketing expenses, transfer agent fees, custodian and audit fees and, other operational expenses are also included in the liabilities of the company.

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NAV all to consider while evaluating the performance of the company

Mutual funds support virtual payments to the investors, like dividends and the interest to its shareholder. In addition to such payments, mutual funds are obligated to distribute accumulated capital gains to the owners. Capital gains are earned when the stock is sold at a higher price than it was bought for. And because of such payments, the NAV all of a company decreases accordingly.

To measure the performance of the mutual funds, compute the annual total return. The annual total return is the actual rate of return of an investment or a pool of investments over a given evaluation period. Experts in handling mutual funds look at the Compounded Annual Growth Rate (CAGR) which is a representation of the mean annual growth rate of an investment over a specified period of time longer than one year provided all intermediate payments for income and gains are accounted for.

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NAV all to consider while putting in practice

Net asset value is usually used to identify potential investment opportunities within mutual funds, ETFs, or indexes. Anyone can also use net asset value to view the holdings in their own portfolio.

To fund in any of the aforementioned assets, an investment account would be needed. Those accounts are generally created by brokerage accounts.

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NAV all illustrations

Let’s consider that a mutual fund has Rs.10 crore worth of total investments in different securities, which is calculated based on the day’s closing prices for each asset. It also has Rs.70 lakhs in cash and cash equivalents on hand, as well as Rs.40 lakhs in total receivables. Accrued income for the day is Rs.75,000. The fund has Rs.1.3 crores in short-term liabilities and Rs.20 lakhs long-term liabilities. Accrued expenses for the day are Rs.10,000. The fund has 50 lakhs shares outstanding. The NAV is calculated as:

NAV = (Assets – Liabilities) / Total number of outstanding shares
NAV = [(Rs.10,00,00,000 + Rs.70,00,000 + Rs. 40,00,000 + Rs. 75,000) – (Rs. 1,30,00,000 + Rs. 20,00,000 + Rs. 10,000)] / 5,000,000 = (Rs. 11,10,75,000 – Rs. 1,50,10,000) / 5,000,000 = Rs. 19.21
For the given day, the mutual fund’s shares will be traded at Rs. 19.21 per share.

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NAV all you need to consider is given above, but we still suggest following your fund manager’s advice and not invest in if you’re a novice to the field of mutual funds.

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