How do I calculate mutual fund NAV?

The **Net Asset Value (NAV)** of a mutual fund is an important indicator that shows the per-unit value of the fund. It helps investors understand how much each unit of the mutual fund is worth at any given time. NAV is calculated daily, based on the total value of the fund’s assets minus its liabilities, divided by the number of outstanding units.

1. What Is NAV?

NAV stands for Net Asset Value. It represents the price of a single unit of a mutual fund. The NAV is calculated at the end of each trading day after the market closes. The mutual fund's NAV helps investors determine the current market value of their investments in the fund.

2. How Is NAV Calculated?

To calculate the NAV of a mutual fund, we use the following formula:

**NAV = (Total Assets - Total Liabilities) / Total Outstanding Units**

Here’s a breakdown of each part of the formula:

• Total Assets: The total value of all the investments held by the mutual fund, including stocks, bonds, cash, etc.
• Total Liabilities: The total liabilities or debts of the mutual fund, including operational costs and other liabilities.
• Total Outstanding Units: The total number of units of the mutual fund that are currently held by all investors.

For example, if a mutual fund has total assets worth ₹10 crore, liabilities worth ₹1 crore, and 9 crore units outstanding, then the NAV of the mutual fund will be:

**NAV = (₹10,00,00,000 - ₹1,00,00,000) / 9,00,00,000 = ₹1.00 per unit**

3. Why Is NAV Important for Investors?

NAV is crucial for investors because it gives you an idea of the current value of your investment in the mutual fund. It helps you track the performance of the fund. When you buy or sell mutual fund units, you do so based on the NAV. The NAV determines how much you will receive when you redeem your units and how much you need to pay when you purchase new units.

For example, if the NAV of a mutual fund is ₹20, and you want to invest ₹1,000, you will be able to buy 50 units (₹1,000 / ₹20). Similarly, if you wish to sell those 50 units when the NAV rises to ₹25, you will receive ₹1,250 (50 units x ₹25).

4. When Should You Check the NAV?

The NAV of a mutual fund is updated every business day after the market closes. It’s important to check the NAV regularly to track how your investments are performing. However, it’s also important to note that NAVs can fluctuate daily based on the market’s performance. So, a one-day change in the NAV might not reflect the long-term growth of the fund.

Instead of focusing on short-term NAV movements, investors should consider the overall performance of the fund over time. Look at the fund’s returns over 1 year, 3 years, and 5 years to get a better idea of how well it is performing.