The Mutual Fund has a wide array of investment options. There are multiple instruments where you can invest your money and get a return on investment. Among the most common mutual fund types are equity, liquid funds, money market, debt etc. The value of a mutual fund is obtained by the term called Net Asset Value. The mutual fund NAV represents the per share market value of the instrument. Let us see how the nav value works:
The net asset value of any mutual fund is calculated by obtaining the value which is a result of the assets of the fund minus the liabilities of the fund. It is a simple process like just like calculating the value of a company. The value is derived on a daily basis where the performance of the fund is calculated by the changing values in terms of assets and liabilities.
The mutual fund nav is represented by the number of outstanding shares or units. This can be said to be the average value of the share at any particular time. For example, if the asset of the fund is calculated to be at Rs 3 crore and the liability of the fund is said to be at Rs 58 lakhs, the net asset value of the fund would be at Rs 2.42 crores. Now this value of Rs 2.42 crore is divided by the number of outstanding shares in the fund. So when the actual nav would be calculated it could come to Rs 48.4.
The mutual fund nav changes on a day to day basis. It should be noted that the assets and liabilities of the fund are depending upon multiple factors including market response. This needs precise calculation and the value is generally published by exerts once at the end of each business day.
The mutual fund nav is also not exactly indicative of the performance of the fund. It is merely an indication of the present value of the fund. It just gives out the amount of money that investors may make if they trade at the current price.