FAQs on mutual fund's NAV calculationPosted by swarali chavan on April 21st, 2019 When you opt for the mutual fund as an investment option, investors often give importance to the returns and its past performance. Seldom are people aware of its worth, i.e. the Net Asset Value (NAV). What is NAV? One of the mutual fund basics is NAV that every investor should be aware before beginning the investment process. The overall cost of the mutual fund scheme depends on the price per unit of the fund which is called NAV. Usually, the unit cost of the mutual fund begins at INR 10, and it rises as the fund's assets start to grow. So, a popular scheme will have higher NAV than the lesser popular one. How important is the NAV when selecting the mutual fund scheme? Many investors believe that a NAV of INR 15 is economical in comparison to NAV of INR 20. However, it is not an accurate observation. Also, it is essential to understand that the share price and NAV are not the same. That brings us to the next question. What is NAV and market price? NAV rates change every day. On the other hand, the cost of the shares is the same as mentioned in the stock exchange. These changes depending on the market factors. How does NAV calculation work? NAV calculation is dependent on two aspects:
How does the cut-off time affect NAV? Mutual fund houses release the NAV every day. This is why they are time-bound. The cut-off limit is generally 2 PM. So, if you invest before 2 PM, you receive the same day’s NAV. If the investment exceeds the cut-off time, you receive the next day’s NAV. Ensure that you are aware of these mutual fund basics before selecting this investment option. Like it? Share it!More by this author |