How Is A Mutual Fund Price Calculated

Net Asset Value Formula:

\[ NAV = \frac{(Assets - Liabilities)}{Shares\ Outstanding} \]

Net Asset Value (NAV):

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1. What Is Net Asset Value?

Net Asset Value (NAV) represents the per-share value of a mutual fund or exchange-traded fund (ETF). It is calculated by subtracting the fund's liabilities from its assets and dividing by the number of shares outstanding.

2. How Does The NAV Calculator Work?

The calculator uses the NAV formula:

\[ NAV = \frac{(Assets - Liabilities)}{Shares\ Outstanding} \]

Where:

\( Assets \) — Total market value of all securities held by the fund (currency)
\( Liabilities \) — Total debts and obligations of the fund (currency)
\( Shares\ Outstanding \) — Total number of shares issued by the fund (units)

Explanation: NAV represents the intrinsic value of each share in the fund, calculated at the end of each trading day based on closing market prices.

3. Importance Of NAV Calculation

Details: NAV is crucial for investors to determine the fair value of their mutual fund investments. It serves as the price at which investors buy and sell fund shares and is used to track fund performance over time.

4. Using The Calculator

Tips: Enter total assets and liabilities in currency units, and shares outstanding in units. All values must be valid (assets ≥ 0, liabilities ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: How often is NAV calculated for mutual funds?
A: Most mutual funds calculate NAV once per day, typically at the close of the trading day based on closing market prices.

Q2: What's the difference between NAV and share price?
A: For mutual funds, NAV is the share price. For ETFs, NAV represents the intrinsic value while market price may trade at a premium or discount to NAV.

Q3: What assets are included in NAV calculation?
A: All securities (stocks, bonds, cash equivalents) at their current market value, plus any accrued income and cash holdings.

Q4: What liabilities are deducted?
A: Management fees, operating expenses, administrative costs, and any other fund obligations are deducted as liabilities.

Q5: Why does NAV fluctuate daily?
A: NAV changes daily because the market values of the underlying securities in the fund's portfolio change with market conditions.