The Net Asset Value (NAV) of the mutual fund is an important factor in determining the MF’s performance and price. We explain why you must track it regularly.
As an investor with a keen eye on market trends and how your investments shape up in response, you keep a lookout for something known as the MF NAV (mutual fund net asset value). In the simplest terms, it is the price at which you buy or sell the units of the mutual fund scheme.
Tapping the mutual fund NAV is important because it helps you know the direction the scheme is going in, and whether it matches up to the previous years’ performance or not. An NAV that remains stable over the years shows that the fund is a reliable one to invest in. On the other hand, NAVs that fluctuate year on year may show a volatile scheme. However, the MF NAV is not the sole determinant of a fund’s performance.
We present the most important reasons why it is essential to check mutual fund NAVs:
* It indicates the value of the securities you own. The main reason to know the latest NAV of mutual funds is to know the overall value of all the securities that you own (these also include cash). The NAV is calculated on a per unit basis after deducting all liabilities, i.e. by deducting debts from the asset value. The resulting figure is now divided by the number of units you hold. Track this number carefully: the higher the mutual fund NAV, the better the performance of the securities.
* It helps you determine when to buy or sell the fund. The NAV rises in response to a rise in price of the securities in your portfolio, and vice versa. Thus, when you keep checking the latest NAV of mutual funds, you get a better idea of when you need to trade the securities in that particular MF scheme. The MF NAV sets the price for when you buy or sell a unit of the fund. Do note that an exit load is levied when selling the fund, so factor it in while computing the sale returns.
* The NAV helps you determine if the scheme is doing as well as expected. Tracking the NAV over a period of time helps you get a perspective on the scheme’s overall performance in response to the market trends. Mutual fund NAVs that are consistently high indicate that the scheme is performing well. But the fund manager will tell you that the NAV alone does not determine the fund’s performance. Keep checking the latest NAV of mutual funds and also the historical average to map how the scheme is faring.
