Calculating The Net Asset Value Of Mutual Funds

The word ‘investment’ is much flung around in today’s world. We have countless ways to tuck away our earnings in safe places, from buying property to fixed deposits and insurance policies. The diversity in portfolios that it allows, along with the option of easy liquidity, makes the mutual fund a popular way to stash one’s savings for a rainy day. It is affected, however, by multiple factors. Economies are constantly changing and the cycle of growth and decline is endless. It is important to know where you stand when the markets close for the day. It is the NAV or the Net Asset Value that allows us to determine this with ease.

Investing in a mutual fund leaves the individual investor with a lot of questions and often trying to make sense of all the numbers thrown at him. The unit prices of the shares, the percentage of the growth that they might/do show play a vital role in telling the investor his position. The reputation of the company and the standing of the selling side are factors that contribute. The best indicator, however, is the study of the NAV or the Net Asset Value of the unit price, over time.

The Net Asset Value very simply put is the value of the assets of a fund’s, after subtracting its liabilities. It is calculated on a per share basis and is revaluated at the end of the day, when the markets close. Figuring out this value can be quite tricky as markets all over the world close at different times. This results in the values being different than what they actually are on paper and gives some an unfair advantage. It is mainly used to value open-ended funds wherein shares are not tradable between investors. They are only redeemable on returns when the investor wishes to withdraw. It should be kept in mind that it is not the latest NAV of mutual funds that indicates a good performance but rather the study of the growth in the NAV over time. Mutual funds are also required by law to distribute their gains amongst their investors. It is hence quite normal to expect a drop in NAV at some point in a given year as the reduction is offset by this distribution.

Calculating the NAV of a particular mutual fund can be quite easy. Information about the assets of a fund is available online on their websites. The value of all the securities currently being held by the firm, both long and short term should be noted. All of the fund’s liabilities should be subtracted from this to find the net assets. When this number is divided by the number of outstanding shares the fund has, it results in the Net Asset Value of a single share. For example, if the net assets of a company are priced at $50 million and it has a million outstanding units, the NAV unit price of the shares is $50. This value can conveniently be found using an online calculator as well. There are companies like Moneycontrol, Bajaj Allianz, SBI Life Insurance, ICICI Prudential, Sharekhan and Reliance Securities with websites offering this service, making the latest NAV of mutual funds available with ease.


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