When purchasing a commodity, we all ask for two simple things to decide the worthiness of the money we pay in for our investments and that are: product quotation and performance. Mutual funds are no different. Mutual funds in a layman’s language are organized and regulated by SEBI under SEBI (Mutual Funds) Regulations, 1996, where in a group of people collectively invest their money in securities.
Mutual Funds allow its investors a diversified investment of funds or a pool of professionally managed basket of securities at a relatively low cost.
As we all know mutual fund types can range from categories such as: equity funds, debt funds, diversified funds, money market funds, guilt funds, sector specific funds, Index funds, tax saving funds, large, mid or low cap funds, open ended funds, close ended funds, dividend paying, reinvestment scheme, etc. When investing you can clearly know, understand and make a choice amongst the above mentioned and other such types of securities. While you seek advice from your money manager and read the policy document you would be able to spot the risk involved and see the latest trends of Net Asset Value (NAV), so as to know the
performance of your mutual funds.
Defining NAV - The Net Asset Value (NAV) of the Units will be determined daily or as prescribed by the regulations. The
mutual fund NAV shall be calculated in accordance with the following formula, or such other formula as may be prescribed by SEBI from time to time.
NAV = [Market/Fair Value of Scheme’s Investments + Receivables + Accrued Income + Other Assets - Accrued Expenses - Payables - Other Liabilities] / Number of Units Outstanding
NAV will be computed upto four decimal places.
The NAV reflects the liquidation value of your investments and by keeping a regular track of it can help you ascertain the performance of your product before you invest in it. By doing so you can keep a close check on market fluctuations and effects on the performance of several investment products. Mostly it is the NAV that acts as an inviting factor for most of the investors looking at various products, and at the same time it also helps them in calculating returns and manages their monthly payments, well in advance. Clearly, NAV acts not just as a formula to know and assess your returns and risk involved, but also enables you to spot and trace mutual funds truly worthy of investments.
While many investors believe in keeping a check and track on
latest NAV offered by different products, there are also a few who firmly oppose and consider this practice futile, because of the simple logic that when one invests in mutual funds, they buy units at NAV that has been calculated at current market price of the assets. Thus, it represents the intrinsic worth of the fund. Whereas, in the case of stock investing, price of stocks usually vary from its book value, which means stock price when compared to the book value of the company can either be higher or lower.
Irrespective of what one believes, keeping a check on the trends of NAV is always a good idea in terms of market knowledge. And though
mutual fund investments have risk attached to them, but when managed well can be quite rewarding.
Summary: The NAV reflects the liquidation value of your investments and by keeping a regular track of it can help you ascertain the performance of your product before you invest in it. By doing so you can keep a close check on market fluctuations and effects on the performance of several investment products. NAV is the per share value of funds on a particular day, as displayed in the market.
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent third-party sources, which are deemed to be reliable. It may be noted that since RNLAM has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; RNLAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RNLAM’s views or opinions, which in turn may have been formed on the basis of such data or information.
Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.