{"id":3915,"date":"2021-08-16T17:11:17","date_gmt":"2021-08-16T11:41:17","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=3915"},"modified":"2022-05-24T15:24:37","modified_gmt":"2022-05-24T09:54:37","slug":"mutual-fund-nav","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/","title":{"rendered":"Mutual Fund NAV Guide \u2013 Meaning, Importance, Features, Types, Formula"},"content":{"rendered":"\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">Mutual funds<\/a> are professionally managed schemes that pool the investment of different investors and then <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> it in different securities. The portfolio of a mutual fund scheme is often diversified and it may consist of even different assets, not just different stocks. Each asset has a different value and so, the per-unit cost of the portfolio is determined using the Net Asset Value, or&nbsp; NAV. Let\u2019s understand what NAV means.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#What-is-NAV-in-mutual-funds\" title=\"What is NAV in mutual funds?\">What is NAV in mutual funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#Calculation-of-NAV\" title=\"Calculation of NAV\">Calculation of NAV<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#Features-of-NAV\" title=\"Features of NAV\">Features of NAV<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#NAV-and-investment-timing\" title=\"NAV and investment timing\">NAV and investment timing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#NAV-vs-market-price-%E2%80%93-the-difference\" title=\"NAV vs market price &#8211; the difference\">NAV vs market price &#8211; the difference<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#Market-price\" title=\"Market price\">Market price<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#NAV\" title=\"NAV\">NAV<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/mutual-fund-nav\/#Using-NAV-to-assess-mutual-fund-performance\" title=\"Using NAV to assess mutual fund performance\">Using NAV to assess mutual fund performance<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-NAV-in-mutual-funds\"><\/span><strong>What is NAV in mutual funds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NAV full form is Net Asset Value. It represents the per-unit price of a <a href=\"https:\/\/www.tickertape.in\/blog\/choose-best-date-for-sip\/\">mutual fund<\/a> or <a href=\"https:\/\/www.tickertape.in\/blog\/etfs-vs-mutual-funds\/\">ETF<\/a> scheme. Since the portfolios of these schemes are diversified, NAV assesses the average market price of each unit of the security held in the portfolio. NAV is used to determine how many units you would get when you invest in a mutual fund scheme. Similarly, when you exit the mutual fund scheme, the NAV is used to determine the number of units redeemed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"calculation\"><span class=\"ez-toc-section\" id=\"Calculation-of-NAV\"><\/span><strong>Calculation of NAV<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The calculation of NAV is quite simple. The aggregate <a href=\"https:\/\/www.tickertape.in\/blog\/market-value\/\">market value<\/a> of the <a href=\"https:\/\/www.tickertape.in\/blog\/mitigating-portfolio-risk-through-diversification\/\">portfolio<\/a> is divided by the number of units to get the NAV. The liabilities and the expenses incurred are deducted from the value of the portfolio before dividing it with the number of securities. The NAV formula is as follows:<\/p>\n\n\n\n<p><strong>NAV = [current market value of the portfolio &#8211; (liabilities + expenses)] \/ number of units of outstanding securities<\/strong><\/p>\n\n\n\n<p>Let\u2019s understand with an example.&nbsp;<\/p>\n\n\n\n<p>Suppose 100 investors invest Rs 10,000 each in a mutual fund scheme. The total corpus amounts to Rs 10 lakh. Now the fund manager invests the corpus as follows (assuming the liabilities and expenses to be nil):<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>200 units of Security A at Rs 1,500 each<\/td><td>Rs 1,50,000<\/td><\/tr><tr><td>300 units of Security B at Rs 2,000 each&nbsp;<\/td><td>Rs 4,00,000<\/td><\/tr><tr><td>300 units of Security C at Rs 1,500 each<\/td><td>Rs 4,50,000<\/td><\/tr><tr><td>Total corpus&nbsp;<\/td><td>Rs 10,00,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>800 units have been bought with a corpus of Rs 10 lakh. So, the mutual fund NAV per unit would be calculated as follows:<\/p>\n\n\n\n<p>NAV = 10 lakh \/ 800 = Rs 1,250\/unit<\/p>\n\n\n\n<p>Now, if you invest Rs 50,000 and the NAV of the mutual fund is Rs 1,250\/unit, you would get 40 units.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"features\"><span class=\"ez-toc-section\" id=\"Features-of-NAV\"><\/span><strong>Features of NAV<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Here are some of the salient features of NAV:<\/p>\n\n\n\n<p>The NAV value is a dynamic figure. It changes with the change in the market value of the underlying assets. When the fund manager buys and sells securities in order to capture potential growth, the value of the total securities changes. This also affects the NAV of the mutual fund scheme<\/p>\n\n\n\n<p>The purchase and redemption of units are done at the applicable NAV<\/p>\n\n\n\n<p><a href=\"https:\/\/www.tickertape.in\/blog\/how-to-sell-mutual-funds\/\">Mutual funds<\/a> are required to declare their daily NAVs every day<\/p>\n\n\n\n<p>The NAV of mutual funds also shows the returns yielded by the scheme. If the NAV grows, it means that the portfolio of the scheme is also growing and that the scheme is generating returns. On the other hand, when the NAV falls, it signals a loss<\/p>\n\n\n\n<p>NAVs are applicable only in the case of pooled investment schemes. So, when you come across NAV, mutual fund or <a href=\"https:\/\/www.tickertape.in\/blog\/exchange-traded-funds\/\">ETF<\/a> would be the likely avenue for the same, since these schemes have an underlying diversified portfolio&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"timing\"><span class=\"ez-toc-section\" id=\"NAV-and-investment-timing\"><\/span><strong>NAV and investment timing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The timing of your investment is very important in determining which day\u2019s NAV value would be applicable when calculating the number of units that you would get. As per<a href=\"https:\/\/cleartax.in\/s\/nav-important-selecting-mutual-fund\" target=\"_blank\" rel=\"noreferrer noopener nofollow\"> SEBI\u2019s latest rule<\/a>, from 1st Feb 2021, the application of NAV would depend on when your investment is credited to AMC\u2019s bank account. The cut-off timing for NAV applicability has been fixed at 3:00 PM, both when investing and when redeeming from the mutual fund scheme.<\/p>\n\n\n\n<p>For example, say you invest Rs 1 lakh in a mutual fund scheme. You make the transaction at 2:00 PM and the funds get credited in the AMC\u2019s bank account at 2:30 PM. Supposing the NAV for the day is Rs 100. In this case, you would get 1000 units (1,00,000\/100).<\/p>\n\n\n\n<p>If, however, the transaction happens after 3:00 PM, NAV of the next day would be applicable. If the next day\u2019s NAV is Rs 105, the number of units that you would get would be 952.38.<\/p>\n\n\n\n<p>In the case of liquid and overnight mutual funds, with values exceeding Rs 2 lakh, the timings are different. In the case of investment, the cut-off time for NAV application is 1:30 PM and for redemption, it is 3:00 PM.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"difference\"><span class=\"ez-toc-section\" id=\"NAV-vs-market-price-%E2%80%93-the-difference\"><\/span><strong>NAV vs market price &#8211; the difference<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Many investors consider NAV to be the market price of securities. This is wrong. The NAV and the market price are two different concepts that have completely different implications. Here\u2019s how:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Market-price\"><\/span><strong>Market price<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The market price is used to denote the value of a single type of asset. It is influenced by the demand and supply of the asset and its market perceptions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"NAV\"><\/span><strong>NAV<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>NAV depicts the per-unit market value of a diversified portfolio of assets. It is determined by the market value of each asset held by the portfolio as well as the number of securities that the fund has. NAV is affected by the liabilities that the fund has and its expenses and it is calculated daily by the fund manager.<\/p>\n\n\n<span class='bctt-click-to-tweet'><span class='bctt-ctt-text'><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fmutual-fund-nav%2F&#038;text=It%27s%20a%20wrong%20notion%20that%20many%20investors%20consider%20NAV%20to%20be%20the%20market%20price%20of%20securities.%20Whereas%20the%20NAV%20and%20the%20marketplace%20are%20two%20completely%20different%20concepts.&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" rel=\"noopener noreferrer\">It&#039;s a wrong notion that many investors consider NAV to be the market price of securities. Whereas the NAV and the marketplace are two completely different concepts. <\/a><\/span><a href=\"https:\/\/twitter.com\/intent\/tweet?url=https%3A%2F%2Fwww.tickertape.in%2Fblog%2Fmutual-fund-nav%2F&#038;text=It%27s%20a%20wrong%20notion%20that%20many%20investors%20consider%20NAV%20to%20be%20the%20market%20price%20of%20securities.%20Whereas%20the%20NAV%20and%20the%20marketplace%20are%20two%20completely%20different%20concepts.&#038;via=TickertapeIN&#038;related=TickertapeIN\" target=\"_blank\" class=\"bctt-ctt-btn\" rel=\"noopener noreferrer\">Click To Tweet<\/a><\/span>\n\n\n<h2 class=\"wp-block-heading\" id=\"performance\"><span class=\"ez-toc-section\" id=\"Using-NAV-to-assess-mutual-fund-performance\"><\/span><strong>Using NAV to assess mutual fund performance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When comparing <a href=\"https:\/\/www.tickertape.in\/blog\/now-analyse-mutual-funds-on-tickertape\/\">mutual fund<\/a> schemes, the NAV of the scheme does not give the right picture of the scheme\u2019s performance. While it remains that the higher the growth in NAV, the higher the returns earned from the fund, a scheme with a higher NAV might not necessarily be better than a similar scheme with a lower NAV. The lower NAV of a scheme might be due to the high <a href=\"https:\/\/www.tickertape.in\/blog\/mitigating-portfolio-risk-through-diversification\/\">diversification<\/a> of the scheme\u2019s portfolio. So, comparing mutual fund schemes solely based on their NAVs is not the right approach. You should, instead, compare the schemes based on their historical returns, consistency, and portfolio composition.<\/p>\n\n\n\n<p>Know what is NAV in a mutual fund to understand NAV meaning and how it is calculated to understand how the per-unit cost of a mutual fund or ETF scheme is determined. Also, keep the cut-off timings in mind when investing in mutual fund schemes to know which day\u2019s NAV would be applicable in allotting units. When investing, compare the funds based on their returns, not NAVs, and then select a scheme.<\/p>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-1 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\">\n<p><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>NAV or Net Asset Value represents the per-unit price of a mutual fund or ETF scheme. Read on to know more about NAV meaning, features, calculation and more!<\/p>\n","protected":false},"author":45,"featured_media":3925,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8],"tags":[525,535,533,524,526,532,527,529,531,534,528,530],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/08\/MF-2.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3915"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=3915"}],"version-history":[{"count":10,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3915\/revisions"}],"predecessor-version":[{"id":8682,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/3915\/revisions\/8682"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/3925"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=3915"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=3915"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=3915"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}