What is Net Asset Value (NAV)

What is Net Asset Value (NAV)?

From a common man's perspective, Net Asset Value (NAV) is simply the price of one mutual fund unit. As a stock has a stock price, similarly, a mutual fund has an NAV. In mutual fund's term, NAV is the total asset value (net of expenses) per unit of the fund. NAV indicates the price at which a unit of a mutual fund is bought or sold.

Example

If you want to buy 10,000 worth of mutual fund "A" and the NAV on that day is Rs10 then you will get 1000 units of that fund.

Formula for calculating Net Asset Value (NAV) - NAV is calculated by dividing the net asset value of the fund by the total number of outstanding units.

NAV= (Assets of the fund-Liabilities of the fund)/ total number of outstanding units of the fund

Where

  • Assets = Market value of mutual fund investments + Receivables + Accrued Income
  • Liabilities = Expenses such as management fees, operating expenses, distribution and marketing fees, audit fees , transfer agent fees, custodian fees, accrued expenses, etc.

Points to note with regard to Net Asset Value (NAV)

  1. It is an indicator of the market value of the fund's units.
  2. It is nothing but the 'book value' of the fund.
  3. It is calculated by the Asset Management Company (AMC) at the end of every business day in case of an open ended fund.
  4. It helps track the performance of the mutual fund you have invested in.
  5. The NAVs of mutual funds are required to be published in newspapers.
  6. The NAVs are also available on the web sites of mutual funds.
  7. A higher or lower NAV has no significance and it should not be considered as the basis for selecting the right mutual fund.
  8. A low or high NAV does not impact the return on investment from the mutual fund. It is quality of fund, which makes a difference on the returns.
  9. Low NAV of a mutual fund refers that the fund has either been floated recently or the fund has performed poorly.
  10. An investor can easily come to know about the actual increase in the value of his investment by calculating the percentage increase in the mutual fund NAV in which he has invested.
  11. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place.

SEBI guidelines regarding Net Asset Value (NAV)

All Mutual Funds need to publish their NAV at every business day as per SEBI guidelines. The Mutual Fund must adhere to all SEBI regulations relating to valuation norms and daily or weekly disclosure of NAVs. The Mutual Fund should maintain documentation of all NAV procedures and methodologies and ensure that the documentation identifies all elements critical to NAV calculation. The Mutual Fund should carry out periodic compliance and audit checks on the NAV calculation methodology to ensure accuracy of calculations and their compliance with the regulatory requirements.

As per SEBI regulations, the NAV of an open-ended scheme shall be calculated and published at least in two daily newspapers at intervals not exceeding one week. However, NAV of a close-ended scheme targeted to a specific segment or any monthly income scheme may be published at monthly or quarterly intervals. All mutual funds are also required to put their NAVs on the website of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place.

Upcoming Bank Holidays

2017 April 29 is a bank holiday in Karnataka due to Basava Jayanthi.
2017 May 01 is a bank holiday in Andaman And Nicobar Island due to Maharashtra Din/May Day.
2017 May 09 is a bank holiday in Andaman And Nicobar Island due to Birthday Of Rabindranath Tagore.
2017 May 10 is a bank holiday in Chhattisgarh due to Buddha Pournima/Sakewa.

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