Friends, in today’s article, I will explain you about the NAV calculation in mutual fund, how the NAV is calculated,
and what is taken into consideration while calculating the NAV.
As I told you about the NAV and mutual fund unit in the previous post, if you have not read that post,
so you can read and get complete information about units and NAV in the mutual fund.
NAV Calculation in Mutual Fund
Friends, as I told you before, a NAV is the price of a unit of any mutual fund.
As the cost of running a mutual fund is 70 crores and that mutual fund has 1 crore units, then what is the cost of 1 unit? 70 apparently Rs.
It is quite easy to calculate NAV. Let’s understand in detail –
To calculate NAV, we have to understand some financial terms in the mutual fund and that is Assets and Liabilities
Assets – Asset in Mutual Fund means the market value of the investment made in the fund today.
Liabilities – In the mutual fund, Liabilities means one day’s expenses for running the fund and one day’s salary of the fund manager.
Total number of units – The total number of Units of that mutual fund.
NAV = (Assets – Liabilities) / Total no of mutual fund units
This formula is used to calculate the NAV and calculating the NAV is very easy.
We calculate the NAV of a mutual fund by dividing the total net assets by the total units issued.
To obtain the total net assets of a fund, subtract any liabilities from the current value of the assets of the mutual fund and then divide this figure by the number of total outstanding units.
The resulting figure is the NAV of the mutual fund.
The NAV of a mutual fund is always calculated at the end of the market.
As you all know this is because the market price of securities changes on a daily basis.
Therefore, the NAV of a mutual fund also changes daily.
For example :- The market value of the securities of the mutual fund scheme is Rs 500 lakh. The mutual fund issues 10 lakh units of Rs 10 to its investors. So, the NAV of the fund is Rs 50 per unit.