The mutual fund itself or some financial firms usually calculates Net Asset value of mutual funds. The mutual funds are usually declared after the closing of stock markets. All mutual funds are expected to publish their Net Asset Value (NAV) as per SEBI guidelines.
What is Net Asset Value?
The price at which units of a mutual fund are bought or sold is known as the Net Asset Value (NAV). The value of all units of a mutual fund portfolio are calculated on a daily basis. From the calculated portfolio all expenses are then subtracted. The result is then divided by the total number of units. This resultant value is known as the Net Asset Value. NAV is also sometimes referred to as Net Book Value or book Value.
NAV indicates the market value of the units in a fund. It helps an investor keep track of the performance about the mutual fund. An investor can calculate the actual increase in the value of their investment by determining the percentage increase in the mutual fund NAV. Net Asset Value, therefore, gives accurate information about the mutual fund performance.
How to calculate your Net Asset Value?
Net Asset Value (NAV) = (Fund Assets – Fund Liabilities) / (Number of Outstanding units)
Total asset value of a fund will have stocks, cash and bonds at market value included. Dividends, interest accrued and liquid assets are also included in total assets.
Liabilities are the money owed to creditors, and other expenses accrued to maintain the fund
The net asset value is determined by the mutual fund company and priced according to this formula. Stocks, on the other hand, are sold through bid and ask pricing on the secondary market which requires an investor to determine a share’s value to them based on expected future earnings, in which they bid accordingly.