Mutual Fund Investments: How NAVs of Schemes are calculated – CNBC TV18

A mutual fund is a pool of money that is managed by professional money managers. They collect funds from investors to buy securities such as stock, bond and money market instruments. It offers individual investors access to diverse, professional managed portfolio. Mutual funds give an affordable option to participate in a diverse range of shares without the cost of transactions for each stock. These funds are usually better for long -term investors.

What is a unit in mutual funds?

Mutual fund units are calculated based on the net asset value of the fund. When you invest in mutual funds, your money is converted into units in the Net Asset Value (NAV) of the fund at the time of purchasing. The value of each unit is calculated by dividing the net asset value (NAV) of the mutual fund scheme by dividing the total number of outstanding units.

For example, if the total assets of a mutual fund scheme are minus any liabilities 1,00,00,000, and 1,000,000 units are outstanding. Will be Nav for each unit 10 ( Divided by 1,00,00,000 1,00,000). If you deposit 10,000 in this mutual fund plan, you will earn 1,000 units ( 10,000 divided by 10).

NAVs up their ups and downs to the value of assets of mutual funds per unit, which represents the performance of underlying investments. Mutual fund units are purchased and sold on the basis of current NAV.

How does a mutual fund unit work?

Understanding how mutual fund unit pricing functions are important for investors. On the day the application is processed, mutual fund units are allocated in NAV. The value of a mutual fund is equal to the sum of all its securities. Thus, the price of a unit is a fraction of the overall value, which is calculated by dividing the total value by the number of outstanding units. This value per unit is known as net property value (NAV). This is determined by reducing any liability by dividing the total value of assets and by dividing it by the number of unit holders.

The assets component of mutual funds includes the cumulative market value of fund investment, receivable, cash, cash counterparts and other earned income.

While calculating the net asset value for mutual funds, the liabilities share the dues, outstanding money to the lenders, and other fees paid to the concerned companies.

How to buy a mutual fund unit?

Investors can buy mutual fund units through various methods, including online mutual fund platforms, brokers or registered distributors. They can invest in a lump sum or systematic investment plans (SIPs).