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How Is NAV Calculated?

Updated on October 4, 2017

NAV is often related to mutual funds and it assists the investor in determining whether the fund is undervalued or overvalued. At every point of time while the market is open, NAV is calculated and the Closing Rate of that trading session is taken as the NAV of the Fund on that day.

  • The Net Asset Value (NAV) is the calculation that determines the price per share in a mutual fund, exchange-traded fund (ETF) or hedge fund on a particular time or date. When markets are opened, stock prices keep on changing constantly. Each day at the end of the day, the NAV of a fund is calculated to see the price changes in the investment which is owned by the fund. Thus, it makes easy for the investors to keep track of the value of their money which they have invested in a fund.
  • The units of a mutual fund are purchased and sold at the price Net Asset Value (NAV) of a mutual fund. Later, it becomes the market value of the stock after subtracting the liabilities. All these values of all the units of mutual fund portfolio are estimated regularly, and then from this other expenses are deducted. The outcome is divided by the total number of units and the resulting value is the NAV.
  • NAV helps an investor to keep a track of the performance regarding the mutual fund as it indicates the market value of the units in a fund. The actual increase in the value of their investment can be easily calculated by an investor, by determining the increased percentage of the mutual fund NAV. Thus, the NAV can give proper information about the performance.
  • How the Calculation of NAV is done – Securities and cash, usually mutual fund assets come under these two categories. Securities, here, include both bonds and stocks. Therefore, at market value, the total asset value will be included in its bonds, cash and stocks. The total asset also includes the liquid assets, dividends and interest.

Also, liabilities for e.g. like money which is owed to creditors and other expenses are also included.

In simple terms, NAV means the value of a fund. You have to keep in mind that net asset values are changing daily. So, it is not an indicator of good performance. To get the most benefit of your money invested in various mutual funds, you need to know these two main things – the knowledge of your funds and ensure that it is a right trading platform.


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