Net Asset Value (NAV)


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Investments are a great way to allow your money to earn for you. However, to yield the best results, you cannot remain completely uninvolved. These can only be achieved with constant monitoring and fine-tuning of investments. For those who have extensive financial investments, the proper management of these investments could mean the difference between success and failure in the markets. While mutual funds are considered safer than traditional investments owing to their diversity, it’s very important to constantly monitor them with the help. In fact, there are professional financial planners for this purpose. This article will explain the benefits of calculating the NAV of your mutual fund investments with a financial planner.

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Net Asset Value (NAV)

  1. 1. Analysing Mutual Fund NAV
  2. 2. What is NAV?
  3. 3. What is NAV?  NAV is the value of assets less the liabilities  Net Asset Value is a more viable way of reading into the value of an investment  It calculates the value of a mutual fund, including its cash value, sans its liabilities
  4. 4. Term  The term Net Asset Value is most often used in connection with closed-ended mutual funds  The ‘per unit NAV’ of a fund indicates how much it will cost an investor to buy or redeem a single unit of the mutual fund
  5. 5. How to calculate NAV of Mutual Funds?
  6. 6. Calculation of NAV  A mutual fund’s NAV is calculated using a set formula  Calculating the total value of the mutual fund’s assets  Deducting liabilities  Dividing the remaining figure by the number of shares outstanding
  7. 7. Shares Outstanding  Shares outstanding is the total number of shares owned by the shareholders of the company and company officials  Excluding stock that has been repurchased by the company
  8. 8. The Formula NAV = (Total market worth of all securities owned by the fund + liquid cash and corresponding holdings - fund liabilities) ÷ total outstanding shares of the fund.
  9. 9. How NAV of Mutual Fund is useful?
  10. 10. For Investors  Certain investors believe NAV to be an exercise in futility, while others stress on its importance  Net Asset Value is simply the price of one of the mutual fund’s units and is indicative of the fund’s intrinsic value  When one buys units in a mutual fund, one buys them at NAV
  11. 11. For Financial Planning  Mutual funds are often used for Financial Planning  There are qualified professionals aiding investors in their financial planning  The importance of sound financial planning is such that there is a certificate for the position, known as Chartered Financial Planner or CFA
  12. 12. Financial Planners  Financial planning is designed to cater to the customer’s requirements  Financial planners will work towards managing your investments to achieve your goals like cash flow management, retirement planning, or even planning for your children’s education and marriage  Maintaining an understanding relationship with the customer is arguably the most important task of a financial planner, and is known as “relationship management”.
  13. 13. What are the benefits of analysing Mutual Fund NAV?
  14. 14. Benefits of Analysing NAV  The ratio of assets to liabilities can be approached at, which helps to determine the level of risk  NAV helps to keep a tab on individual’s risk and thus, ensures better risk management  NAV can also be evolved to suit the specifications of various new forms of investments, with its numerous derivations such as Absolute Return, Simple Annualised Return, Compounded Return, and Compounded Annual Growth Rate
  15. 15. Regular Update of NAV  Calculation of NAV is usually done on a frequent basis  Regularly checking on the performance of your mutual funds with the help of an expert is all that you really need to ensure that your investments match your current objectives  An application of the NAV formula, called the Annual Total Return method is used for the measurement of the measurement of mutual fund performance
  16. 16. Why NAV should be considered?
  17. 17. Conclusion  Net Asset Value of a mutual fund indicates how well the fund manager has placed his or her bets in the market  In the case of investment in mutual funds, calculating the value is little complex. Here is where one can look at the concept of Net Asset Value or NAV  Thus, NAV is a very important tool for investors
  18. 18. Thank You Get more insights on Mutual Fund and Mutual Fund Investments here