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Investments are a great way to allow your money to earn for you. However, to yield the best results, you cannot remain completely uninvolved. These can only be achieved with constant monitoring and fine-tuning of investments. For those who have extensive financial investments, the proper management of these investments could mean the difference between success and failure in the markets. While mutual funds are considered safer than traditional investments owing to their diversity, it’s very important to constantly monitor them with the help. In fact, there are professional financial planners for this purpose. This article will explain the benefits of calculating the NAV of your mutual fund investments with a financial planner.
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Analysing Mutual Fund NAV
What is NAV?
What is NAV?
NAV is the value of assets less the liabilities
Net Asset Value is a more viable way of reading into the value of an investment
It calculates the value of a mutual fund, including its cash value, sans its liabilities
Term
The term Net Asset Value is most often
used in connection with closed-ended
mutual funds
The ‘per unit NAV’ of a fund indicates
how much it will cost an investor to buy
or redeem a single unit of the mutual
fund
How to calculate NAV of Mutual Funds?
Calculation of NAV
A mutual fund’s NAV is calculated
using a set formula
Calculating the total value of the mutual
fund’s assets
Deducting liabilities
Dividing the remaining figure by the number
of shares outstanding
Shares Outstanding
Shares outstanding is the total number
of shares owned by the shareholders of
the company and company officials
Excluding stock that has been
repurchased by the company
The Formula
NAV = (Total market worth of all securities
owned by the fund + liquid cash and
corresponding holdings - fund liabilities)
÷ total outstanding shares of the fund.
How NAV of Mutual Fund is useful?
For Investors
Certain investors believe NAV to be an exercise in futility, while others stress on its importance
Net Asset Value is simply the price of one of the mutual fund’s units and is indicative of the fund’s intrinsic value
When one buys units in a mutual fund, one buys them at NAV
For Financial Planning
Mutual funds are often used for Financial Planning
There are qualified professionals aiding investors in their financial planning
The importance of sound financial planning is such that there is a certificate for the position, known as Chartered Financial Planner or CFA
Financial Planners
Financial planning is designed to cater to the
customer’s requirements
Financial planners will work towards managing your
investments to achieve your goals like cash flow
management, retirement planning, or even planning for
your children’s education and marriage
Maintaining an understanding relationship with the
customer is arguably the most important task of a
financial planner, and is known as “relationship
management”.
What are the benefits of analysing Mutual Fund NAV?
Benefits of Analysing NAV
The ratio of assets to liabilities can be approached
at, which helps to determine the level of risk
NAV helps to keep a tab on individual’s risk and
thus, ensures better risk management
NAV can also be evolved to suit the specifications
of various new forms of investments, with its
numerous derivations such as Absolute Return,
Simple Annualised Return, Compounded Return,
and Compounded Annual Growth Rate
Regular Update of NAV
Calculation of NAV is usually done on a frequent basis
Regularly checking on the performance of your mutual funds with the help of an expert is all that you really need to ensure that your investments match your current objectives
An application of the NAV formula, called the Annual Total Return method is used for the measurement of the measurement of mutual fund performance
Why NAV should be considered?
Conclusion
Net Asset Value of a mutual fund indicates how well the fund manager has placed his or her bets in the market
In the case of investment in mutual funds, calculating the value is little complex. Here is where one can look at the concept of Net Asset Value or NAV
Thus, NAV is a very important tool for investors
Thank You
Get more insights on Mutual Fund and
Mutual Fund Investments here
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