Ever wondered how to gauge the performance of a mutual fund? Enter Net Asset Value (NAV), a crucial figure that mirrors the market value of a fund’s unit. Calculated at the end of each trading day, NAV offers a snapshot of a fund’s current value, making it an indispensable tool for investors.
How is NAV Calculated?
To put it simply, NAV is the difference between a fund’s total assets and its liabilities, divided by the number of units outstanding. This calculation is typically done by the fund house or an external accounting firm. Since the value of a fund’s assets changes throughout the day, NAV provides a standardized measure of what each unit of the fund is worth after the market closes.
Does NAV Matter to Investors?
This is where things get interesting. Despite its significance in tracking a fund’s value, the actual NAV number—be it Rs 15 or Rs 1000—doesn’t influence an investor’s decision-making process. What truly matters is the fund’s performance and how it aligns with the investor’s financial goals.
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