WHAT IS MUTUAL FUND NAV AND HOW NAV IS CALCULATED
Normally, investors confuse NAV as something like a share value. NAV of mutual fund and value per share are 2 very different things. NAV or Net Asset Value is basically ‘book value’ of a mutual fund.
It’s considerably completely different from a company’s share price. The price quoted on the stock exchange of a company usually differs from its book value. The price of a share incorporates the outlook of the company’s future prospects, existing demand-supply of that share and several other objective and subjective parameters. Whereas, NAV of a mutual fund is the summation of the market value of all the shares held in the portfolio including cash (fewer liabilities if any) and divided by the entire number of units outstanding. It’s primarily the price at which a unit of a mutual fund is bought or sold. As there’s no idea of market value for the mutual fund therefore when we buy mutual funds, we buy it in terms of NAV and that is the book value.