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How to calculate the NAV of mutual fund

Net asset value is the value of an entity’s assets that minus the value of its Debts, often compared to open-ended or mutual funds, because the shares of such funds are registered with the United States Securities With their net asset value, will be redeemed to the Exchange Commission.

The NAV of a mutual fund is the price at which units are bought and sold from mutual funds. It happens when the market value of deducting its liabilities. The value of all units in a portfolio of mutual funds is measured daily, thereby minus all expenses. The sum will then be divided by the total number of units resulting in the NAV value. Net asset value is sometimes called Net Book Value or Book Value. Let’s address in a little more detail the estimate. 

Calculate the NAV of the mutual fund is easy, minus the value of the fund’s liabilities from the value of its assets and then divides the result by the number of outstanding shares. To calculate the total assets of a fund, we add its overall cash and cash to the market value of all securities owned by that fund.

NAV suggest the market value of the units in a portfolio. So, it permits an investor to track the results of a mutual fund. By calculating the percentage increase in NAV mutual funds, an investor will determine the actual increase in the value of his fund. Therefore, NAV provides accurate information about the results of mutual funds. 

Calculation of net asset value

There are generally two sorts of mutual fund assets –

  • Securities
  • Cash

Cash includes all bonds and stocks of securities. As a result, a fund’s total asset value will consist of its market value shares, cash and bonds. Total assets include dividends and interest earned and is liquid assets.

It also includes liabilities such as money given to creditors and other accrued expenses. Now the equation is: 

Net Asset Value (NAV Formula) = (Assets – Debts) / (No. outstanding units)

Pay attention to some points– Mutual funds and other accounting firms themselves calculate the NAV of the mutual fund. Because mutual funds are based on stock markets, they are usually announced after the closing hours of the exchange. As per SEBI guidelines, all mutual funds are required to publish their NAV every business day. This expense ratio is the sum of all expenses incurred annually by mutual funds, including operating and management fees, distribution and marketing fees, transfer officer fees, custodial fees and audit fees.

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For an in-depth look at a reasonable investment decision, readers are urged to seek independent professional advice, check the content before making any investment. Not any investment manager, trustee, employees, their respective directors, partners or representatives shall in any way be liable for any direct, indirect, extraordinary, incidental, consequential, punitive or exemplary loss, including consequential information profit loss is included.

The total return is calculated by adding the dividend distributed during the holding period to the absolute change in NAV, and dividing the NAV at the initial date.

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