Net Asset Value - Meaning and Significance

In case of a mutual fund, we always hear the word NAV. Let us discuss what does it actually mean. The full form of it in case of a mutual fund is Net Asset Value. It means the value of a Fund's assets after deducting its liabilities. To calculate the exact value of it,an individual or investor has to divide the deducted value by the number of units outstanding. AMFI or Association of Mutual Funds of India has made it mandatory to declare NAVs of mutual funds on a daily basis. It is usually declared at 8 pm daily.

It is used to purchase units of mutual funds. The units allocated to an investor is simply the amount to be invested to be divided by the current NAV of the fund. It is calculated at the end of each trading day. The NAV of the dividend option of a same fund is less than the growth option of the same fund. This is because dividend paid is deducted from it.

The net asset value of all schemes of all major fund houses are displayed daily on their respective websites. The same are updated daily on the AMFI website also. The fluctuation of it or its increase or decrease reflects the performance of its fund against the benchmark it tracks.

In case of purchase or sell of a fund on a particular day, the units to be allocated to an investor is decided after the end of a trading day. In case of a fund with an exit load, the redemption value is always less than the NAV of the units multiplied by the NAV. This is because of the exit load applicable. Thus this is all about the NAV of a mutual fund.

Source by Suddhadeb Chakraborti