Net Asset Value per unit (NAV)

What is NAV of a Equity Mutual Fund?

In case of a Mutual Fund , the NAV of a fund is the total value of all the cash and stock in the fund's portfolio minus any expences, divided by number of units that the Mutual Fund may have sold.

What are the expences involved ?

Mutual funds would have to pay brokerage every time they buy and sell stocks , they would have expence in marketing the Mutual Fund , paying the fund managers, and other charges involved in maintaining the folios and other administrative charges. SEBI , has mandated that expences cannot cross 2.5% of the total Amount under management of a particular scheme.

So you would see here that better the mutual fund is able to manage its costs,better it would be for the investors । Lesser the Mutual Funds buys and sells , lesser would its brokerage expence, hence lesser its expense.So always do look at the expence ratio of a fund .

When is NAV calculated

NAV is calculated at the end of everyday after the trading ends . This is done by finding value of all the stocks in the portfolio of the Mutual fund based on the day ending price and also adding to this any cash or other security that Mutual Fund has and then subtracting all the expences involved and finally dividing this amount by the number of units that has been issued by the Mutual Fund .

So even if there is huge fall/rise in the price of a certain stock which the Mutual Fund holds in the middle of the day, that would not affect negatively or positively the mutual fund NAV as the day end price is what counts ।

What price do investor pay to Buy/Sell Mutual Fund Units ?

Even if you give a buy or sell instruction to your Mutual Fund at the start of the day , the price or NAV that which your units would be bought or sold , would be the one that gets calculated at the end of that particular day.

But suppose you give buy or sell instructions to your Mutual Fund after the NAV is calculated for the day , that is after 3 PM , than your buy or sell request would be implemented or executed only at the end of the next working day after the NAV of the next working day is calculated.

So bottom line is , you would never know the exact NAV at which your Buy or Sell instruction would be executed.

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