Here's Why you should know the latest NAV of Mutual Funds

The NAV is an important indicator of the performance of the fund you hold and its growth trajectory. This article discusses the importance of understanding the mutual fund NAV.

Investors are often confused at several points in the business cycle. There may be times when the markets are tanking, thus bringing down the value of your investments. At other times, there are minor price corrections that benefit your portfolio. Throughout this, there is one factor that helps you determine whether it is time to do nothing or take affirmative action with your fund: the NAV.

Abbreviated from the term ‘Net Asset Value’, the NAV is an indicator of the fund’s historical performance and current standing. It is calculated on the basis of each MF unit and also cash, after deducting all the liabilities on it. Hence, the higher the latest NAV, it means that the fund is performing well.

Why do the MF NAVs matter in the broader scheme of things? Let’s find out:

* More NAV = Better performance. There is a direct proportion between the price of the securities you hold and their corresponding NAVs. Thus, the higher the price rise of the securities, the higher the NAV. Also, the lower the price of the securities, the more the NAVs fall. This helps you see when the fund is growing or not. Studying the mutual fund NAV history will give you an overview of how the scheme has been performing despite market trends and fluctuations. It is safe to invest in funds that have posted consistent growth ever since inception (measured over eight years or more, preferably).

* It helps you know the state of your fund portfolio. If you wish to know what your MF portfolio is currently worth, just find out the NAVs. The latest NAVs of mutual funds give you a clear idea of the total value of all the securities you currently own. If the mutual fund NAV is higher, it means that the fund is performing well. This logic applies to all the MFs you own. If the NAV registers the highest figures ever seen in that MF, it means that the scheme has set a new benchmark.

* It helps you decide when you should buy or sell. The NAV is an important indicator of whether it is the right time to buy or sell the fund. The latest mutual fund NAV helps you determine the right buying or selling point. Your fund manager will advise you on the right time to make your move, but do note that when you sell the fund you take into account not just the NAV, but also exit load. Another point worth noting is that there are fewer schemes with higher NAVs, though the investment value is the same when you buy fewer units.