While talking about Mutual Fund Investments, you might have come across the term NAV. Do you know...
- What is NAV?
- How it is calculated?
- How frequently it is calculated?
- When it is calculated?
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Short Video:
What is NAV?
NAV stands for Net Asset Value.
When you invest your fund through Mutual funds, Your fund manager invests your money into some group of stocks. We can imagine, your fund manager creates a bundle of stocks.
We will call that 1 bundle as a 1 Unit of the Mutual Fund. and the Price of the 1 Unit of the Mutual Fund is known as NAV (Net Asset Value)
How & When it is calculated?
As you know, the price of the stock changes in each second. but that is not the case with the NAV of the Mutual Funds.
Every day, after the end of the trading session (i.e. after 3:30 PM), Every stock has a closing price.
Using the closing price of each stock, the NAV of the mutual fund is calculated.
How frequently NAV is calculated?
That means the NAV of the mutual fund is calculated only once a day, unlike the price of the stock.
NOTE:
- The expense ratio of the mutual fund is adjusted (included) in the NAV. You don't need to pay the expense ratio explicitly.
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Akshay P Daga