Now, let’s focus on the mutual fund, particularly how its value is calculated. For this, you need to understand the term Net Asset Value also known as NAV. If you have been watching the FIFA World Cup 2018, during the break you would have seen Ads by Mutual Funds Sahi Hai. Mutual Funds Sahi Hai is a campaign launched by AMFI to promote awareness on mutual funds.
What is NAV? How is NAV calculated? Let’s get the answers. Want to know more on Mutual Funds? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
The sum total of all the assets a mutual fund has (stocks, bonds, cash and so on) are called AUM (Assets Under Management).
Now, you and several investors invest in mutual funds. The total value of all the investments you and several investors make is called AUM. The Mutual Fund is divided into units and you get units of a mutual fund, depending on the amount you invest.
So, what is NAV or Net Asset Value? NAV is the total value of all the mutual funds assets minus the value of all its liabilities per unit. It is the price at which you buy or sell units of a mutual fund.
The assets of a mutual fund are securities like equity shares, bonds, commercial papers and debentures. Accrued interest and dividends are also the assets of the Mutual Fund. Liquid Cash is also an asset of the mutual fund.
The debts of a mutual fund are money to be paid for outstanding liabilities and expenses. A number of units outstanding is the total number of units allotted so far in this fund. It is the number of units held by all the investors of a mutual fund.
The Mutual Fund House (AMC) takes into account the market value of all the assets on a daily basis to calculate the NAV.
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Cut-off timings determine the NAV you get when you buy or sell units of a mutual fund scheme. The cut-off time will determine the NAV you get when you buy or sell units of a mutual fund.
Liquid funds, Debt Funds and Equity Funds have different cut-off timings. The cut-off time for liquid funds is 2 PM. If you invest in the units of a liquid fund scheme before 2 PM, you are allotted units of a mutual fund at the NAV of the previous day. After 2 PM it is the next day’s NAV.
In the case of equity and debt funds, if you invest in the units before 3 PM, you are allotted units of a mutual fund at the NAV of the previous day. After 3 PM it is the next day’s NAV.
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