What is NAV & How is it calculated ?
NAV - Net Asset value indicates the market value of the each unit of the scheme. It is calculated by the dividing the total value of assets minus liabilities by the total no of units outstanding. NAV is calcualted on a daily basis. It helps an investor keep track of the performance of the mutual fund.
Now the formula is:
Net Asset Value (NAV) = (Total Assets – Total liabilities) / (Number of Outstanding units)
The total asset value of a fund will include its stocks, cash and bonds at market value. Dividends and interest accrued and liquid assets are also included in total assets.
Liabilities include money owed to creditors and other expenses accrued. Expenses include the operating expenses and the management fees, distribution and marketing fees, transfer agent fees, custodian fees and audit fees.
The market value of the stocks & debentures is usually the closing price on the stock exchange where these are listed. Since, mutual funds depend on stock markets, they are usually declared after the closing hours of the exchange. All Mutual Funds are required to publish their NAV at every business day as per SEBI guidelines.