What is Net Asset Value (NAV)?

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What is Net Asset Value (NAV)?
Net asset value (NAV) depicts the market value per share for a particular Mutual Fund. NAV is calculated by subtracting all the liabilities from total assets and then dividing them by the total number of outstanding shares. If one has to determine the price of each fund unit, then one would need to gather the market value of a portfolio and then divide it by the total current fund unit.

Usually, the unit cost of a mutual fund begins with rs.10 and it would eventually grow, with the growth of assets under the fund. That is why popular funds have a higher NAV. It is mostly used in the case of open-ended funds. These shares do not get traded between shareholders, it would just help to determine the value of the fund.

What is the formula to Calculate NAV?
There is a very easy formula to calculate NAV-

NAV= (total asset)-(total liabilities)/ total outstanding shares

Types of Net Value of an Asset calculated?
1. Daily net valuation of assets-
At 3.30 when the stock market closes, all the mutual fund companies evaluate the total worth of their portfolio. The fund houses deduct all the expenses at the end of the day, to get the net value of assets.

2. General net calculation of the net value of assets-
The general net value of an asset is the price of its share. This calculation gives an estimated market value of a particular asset and can change with market fluctuations.

How can NAV be useful to you as an investor?
NAV is not what you think, it doesn’t determine the value of each share, which most investors assume it to be. NAV helps you understand the total monetary worth of assets of the company, while in other documents you just come across liquid assets, it’s just a good way to make your investment decisions.

Conclusion – NAV can be a good factor while making your decisions, but it doesn’t matter that much, but would help you understand the assets and liabilities of a company.

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