Net Asset Value NAV

Abstract:

The net asset value - NAV is defined as the value of each share of mutual fund and it is usually expressed as per-share amount. Net Asset Value is calculated on a daily basis after the trading closes.

An Overview of Net Asset Value NAV

The Net Asset Value - NAV mainly determines the value of each holdings of the mutual fund. It is expressed as per-share amount. In a majority of the mutual fund holdings, the Net Asset Value is calculated on a daily basis after the trading closes in some specified financial exchange. However in some of the mutual funds, the net asset value is calculated many times in a day during the trading period.

The open-end schemes in mutual funds sell as well as exchange their shares at the net asset value. The closed-end schemes in mutual funds are allowed to sell their shares at either higher or lower price range than their actual net asset value. This system is known as the premium or discount in mutual fund industry. In the mutual fund industry, when a fund is divided in varied groups of shares, each group has its own NAV which clearly determines the difference in fees and expenses payable by various groups.

Net Asset Value of Mutual Funds-

A Mutual Fund is a fund which is operated by an investment company which collects money from various shareholders connected with the mutual fund and invests them in a group of assets. The money generated from the selling of shares is used in buying various investment instruments like stocks, bonds, and money market vehicles. The shareholders receive an equity position in the fund depending on the units they hold and succumbing to the underlying securities of the fund.

Some mutual funds in India have securities which are not sold on formal exchange on a regular basis. These securities widely include shares in small scale or insolvent companies, derivatives, and private investments in any unregistered stocks or non-public company. The fund manager forms an estimation of the value of these securities while calculating their net asset value and accordingly determines the amount of fund's assets to be invested in such securities as these securities usually lack a public market.