NAV or Net Asset Value is the unit price of a mutual fund scheme. Investors can track the fund’s performance by noting the percentage decrease or increase in its NAV over a specific period. NAV is calculated regularly during the market’s closing time. Several factors like closing market prices of the securities it holds are taken into consideration. It is the sum of the value of all securities including cash minus the liabilities which is further divided by the total number of outstanding units.
NAV can have two components as per SEBI: Market price and Value of Assets. If you invest in a fund scheme (not liquid schemes) before 3 p.m. on any trading day, you will get the NAV of that particular day. You will get the results the next day if you invest after 3 p.m. Below are a few other things to know for an informed choice.
1. Lower NAV or Higher NAV?
It is a common myth that a high mutual fund NAV will fetch better returns. But a higher NAV does not automatically mean well-performing mutual funds. It can simply mean that the fund has been around for a long tenure and shown great past performance. Similarly, one may also invest in a lower NAV since it has more growth scope and provides high returns. The truth is that only performance is the key while investing.
2. NAV Vs Stock Price
A stock price reflects a real sale which is a trade of shares between buyer and seller. It is pure supply and demand. A NAV, on the other hand, is the price of a single unit in a mutual fund. Investors usually consider both the figures to calculate the investment value of their portfolios and assess buying and selling strategies.
3. How to Know the Latest NAV?
The NAV per unit of all mutual fund schemes has to be updated on AMFI’s and the Mutual Funds’ website by 11 p.m. on the same day. So, this way you can know the latest mutual fund NAV at the end of each day. The fund’s market value per unit will be calculated by dividing the total value of all assets in a portfolio minus its liabilities.
4. The Relevance of NAV For Investors?
NAV will determine how many units will get allotted for the investment amount. It reflects the total shareholder or unit holder equity position. It is crucial to know what is NAV and get an idea of the calculation to understand the worth of a single share.
5. Impact of Sensex and Nifty on NAV
The effect on any NAV depends on how much the mutual funds have invested in companies that are a part of either one or both. For instance, the NAV of large-cap mutual funds that invest in the biggest firms in India will be significantly affected by Sensex or Nifty. Multi-cap mutual funds usually invest in different-sized companies. They may not be affected by the changes in Sensex or Nifty depending on the large-cap assets.
Having a clear idea of what is NAV will help you know the value of an investment fund. Make sure to talk to financial experts before taking the leap.