Know the NAV of your Mutual Funds Before you Invest

All of us know that investing in a mutual fund today is a must. There are great investment benefits and you would get certain tax benefits too. One of the key points you must follow when you are investing in them the ‘net asset value’. This number represents the per share market value of the fund you have chosen. In simpler words, it is the price with which investors are bidding to fund shares from the company and also to sell them too.

So, how do you derive this value for a mutual fund? It is quite simple – you have to add the complete total of cash and securities in the fund portfolio (the assets) and remove the liabilities that are present. For example, let’s say a fund has the assets of 3 million and the liabilities of 2 million; then the NAV of the fund would be 1 million.

The computation of mutual fund NAV is calculated at the end of every day and is of great importance to investors. You can also figure out the real time NAV performance based on the traded fund series. In other words, you can easily find out the price per unit of the fund, by dividing the NAV by the number of outstanding units. This would be different from that of a common stock that is in the stock market. While this is based on supply and demand forces, that of the stock market is purely on market sentiment.

Using the NAV of a fund, you can easily understand the present condition of the fund. You can also chart out a series to figure out how the demand for the fund would be. You would not be able gauge the performance of the fund though as it would be independent of the NAV.