If you are new to investing, you may not fully understand the NAV of mutual funds. In fact, this is a concept that hasn’t been widely understood by the investment community for a while.
This is clear because of the fact that many mutual funds are collecting huge corpus in the New Fund Offers (NFOs), and in the past, the schemes were negligible. Learning more about the NAV and its effect on your investment can be beneficial.
Definition of the NAV
NAV actually stands for Net Asset Value. This is the sum of the market value of all shares that are held in a portfolio, which includes the cash, minus the liabilities and divided by the number of outstanding units. As a result, the NAV is really nothing more than the book value of a mutual fund.
The Impact NAV Has on Returns
When thinking about the NAV of mutual funds, you should understand just because a mutual fund has a lower NAV, it doesn’t automatically mean it is going to provide better returns.
It is the quality of the fund that is going to make a huge difference in the returns you receive.
The fact is, understanding the process used to invest in mutual funds can be quite confusing. In fact, the NAV of mutual funds is just one factor that has to be understood and figured out. As a result, investors who aren’t confident in their ability to navigate these technical waters alone should consider hiring a portfolio manager. They can ensure you make investments that are going to help grow your portfolio.