The net asset value of a mutual fund is calculated by taking the total value of the assets held by the scheme, deducting any liabilities and expenses from this amount, and then dividing it by the total number of units issued by the scheme.
So, the formula to calculate the NAV of a mutual fund is:
Net Asset Value (NAV)= (Total Assets – Liabilities) / Total No. of Outstanding Units
Let’s understand this with a simple example:
Let’s assume that the market value of the assets held by a mutual fund scheme is ₹5,00,00,000. Now, if the mutual fund scheme issues 20 lakh units to its investors, the net asset value of each unit of the mutual fund scheme is ₹25.
A mutual fund’s net asset value is always computed at the end of the day after the stock market closes.