Mutual Fund NAV: Is Not That Difficult As You Think

mutual fund nav

What is NAV?

Net Asset Value i.e Value of Total Assets Just like in the context of stock, the share price is in the same way in respect of mutual funds, the value of one unit of the fund is measured in its NAV. One day expenditure is to be spent on running a mutual fund through expense ratio, and after that, the NAV of that day is calculated.

What is a Unit in Mutual Fund?

Let’s assume that you invest ₹ 10000 rupees in a scheme of mutual funds. Its NAV is ₹ 200. In this situation, you will get 50 units. How to divide 10,000 by 200? you get 50. 10,000 / 200 = 50 If you invest in the scheme you get this unit. These units have the highest importance in buying and selling.

Now Let’s assume that within a year of span NAV increases from ₹ 200 to ₹ 300 and you choose to sell it. What will happen then? Now you will get ₹ 15,000. This amount will be made by multiplying 50 units by ₹ 300. i.e  50 * 300 = 15,000

Also, read Things You Should Know About Equity Mutual Funds

How is NAV Calculated?

We can’t calculate the NAV during market hours as the price of the underlying holdings (say stocks) changes every minute. NAV is calculated at the closing  of every market day,
NAV = (Assets of the fund –  Daily Expenses of the fund) / Total Number of units of the fund

To calculate Nav, the cost of running a mutual fund from the total investment of that mutual fund (whether it is Stock, Bond or Deposit, etc.) is subtracted. And after then the current amount will be divided by total no of shares outstanding.

For example, if an XYZ fund has assets of $10 and liabilities of $5 million,then it would have NAV of $10 million and Now suppose if the fund had Rs 5 million shares outstanding, Nav per unit would be $10 million(Assets of the fund – Liabilities of the fund) divided by 5 million, which equals $ 2.

NAV fund is calculated by the asset management company (AMC) of that fund and it’s calculated at the end of each business day.

How is NAV used?

It is the price of the single unit mutual fund. This is also the price at which we can sell and buy units from mutual funds Companies. It’s not a fixed price, Its keep Fluctuating day by day depends on the performance of a particular mutual fund.

For Example :

Current Nav Of CPSE ETF-G – ₹ 27.50

 Portfolio impact over Nav

Most of the units in the mutual fund have a base value of ₹ 10 or ₹ 100. The NAV curve of the unit keeps increasing as per the market value of the fund’s portfolio in each business day. It decreases when Companies under Portfolio is not performing well.

How Sensex and Nifty affects mutual fund’s NAV  the value?

It depends on the type of mutual fund. There are many types of assets in many mutual funds.NAV of fund got affected by the benchmark index like Sensex or Nifty

Even the degree of which mutual fund is affected by Sensex or nifty, it depends on type and quantity of assets held by Sensex: It is also known by the name of BSE 30.

These companies are among the most financed financial companies in the country. Nifty: Like Sensex, nifty is also a free-float market weighted stock of the largest companies listed in the National Stock Exchange (NSE). But Sensex counts nifty 50 most popular companies.

It includes 13 industry sectors. In this, It also includes many stable and financially sound companies. Impact on NAV: The effect of Sensex and nifty on any NAV will depend on how much the mutual funds have made in these companies
invested that is a Sensex or nifty or a part of both.

Investing in the largest companies in the country, large-cap mutual. The NAV of funds is highly influenced by Sensex or nifty coupling. Multi-cap mutual funds invest in companies of a variety of sizes. Based on the amount of their large cap assets. It may or may not be affected by the changes of Sensex or nifty.