You might have come across NAVs when buying the units of a mutual fund. A mutual fund NAV is more than just a book value. There might be some things you might not know about the NAVs of mutual funds, collected from NAV’s history and some of the latest NAV facts.
Here are 10 things to know about NAV which can enrich your knowledge about investing:
#1 NAV and market value
The NAV or Net Asset Value can be defined as the sum total of the market value of all the shares of a portfolio, divided by the total number of outstanding units. NAV is also known as the book value of the unit. You can check NAV online on a trusted financial website.
#2 NAV and fund value
Mutual funds usually begin with a unit cost of Rs. 10. This value grows when the assets under the fund grow under the management. Since the value of a mutual fund grows under the company’s management, the more popular the fund, the higher will be its NAV.
#3 NAV and changing frequency
When it comes stocks, their values can change within seconds. Unlike stocks, the value of NAVs does not change throughout the day.
#4 NAV and daily value
NAV can change from day-to-day since its value is calculated every day after the markets close. Therefore, if you are purchasing the fund units in the morning, you may be purchasing it at a price that will be decided only after the markets close later in the day. Conversely, if you buy fund units in the evening, you will get a NAV allotment of the next business day. This will also hold for redemption.
#5 NAV and relevancy
NAV is slightly irrelevant when it comes to choosing mutual funds, as a higher or lower NAV does not necessarily help indicate how beneficial it will be for you. To know about the benefits, you will need to check the factors like the past performance of the fund. The NAV is mainly used when purchasing units of the mutual fund.
#6 NAV and timeframe
The NAV can be analysed over a specific period to get better insights on the performance of the mutual fund.
#7 NAV and purchase price
Looking at NAV’s history and facts one can see that in the past, the sale price of schemes was allowed to be higher than the NAV. This difference between the two prices was called as the Entry Load. In the same way, schemes were also allowed to keep the re-purchasing price lower than the NAV. This difference was termed as the ‘Exit Load’.
#8 NAV and holidays
All orders placed for mutual fund units on holidays will be carried out at a NAV price set on the next working day.
#9 NAV and time zones
Dealing with NAVs is prêtty simple, but you have to be cautious about time zones. For instance, if the ETF securities are held in a different time zone, the NAV will be quoted on the last price quoted on the exchange.
#10 NAV, NIFTY and Sensex
The effect of Sensex and Nifty on the NAV of mutual funds depends on how invested the fund is into the companies that are part of the NIFTY and Sensex. Investment in large companies will affect the NAV in a more significant way, as compared to smaller companies.
Now that you know a great deal about the net asset value, you can go ahead and take a look at values of NAV online, for the mutual funds you are interested in.