Acronyms are very scary for a lot of people. Acronym matlab vo shabd jiska individual meaning kuch nahi hota. An acronym only makes sense if you expand each letter into a word. So, an acronym is really a phrase which has been condensed into one word.
Today's episode is about one such acronym called NAV. But don't worry we will break down this concept for you in extremely understandable and lucid language. Let's start with the full form. NAV stands for net asset value. It’s a useful term if you are looking to invest in a mutual fund and even if you are looking to clear your investments in a mutual fund. Simple language mein kahen, toh NAV aapko yah batata hai ki koi bhi fund ka per-share value kya hai.
We all know that a mutual fund is not just one stock. A mutual fund is never just one security or one commodity. A mutual fund is a consolidated financial product that includes a lot of equities and debt-based securities. Therefore, when buying a mutual fund, you are not concerned so much with the individual value of each and every asset in that fund. You are concerned with the fund’s value as a whole. Mutual fund mein individual stocks are not as important as the selection and the curation. Whether or not the selection and the curation are working together to give good returns can be understood by looking at the net asset value of the fund.
Net asset value ka formula bahut simple hai. You simply take all the assets of the fund, you subtract the fund’s liabilities from it, and you divide what you get with the total number of outstanding shares. A Mutual fund’s assets are the capital gains it has made over the years. Mutual funds liabilities may include payments which are pending. The total number of outstanding shares is simply the number of shares that people have bought of the mutual fund.
Suppose aapne ek mutual fund mein hazaar rupaye invest kiye. Agar iss fund ka Net Asset Value 50 hai, toh iska matlab yeh hai ki aapane 20 shares khareed hai. Net asset value comes into the picture when you are looking to liquidate your position in a mutual fund or when you are looking to invest in the mutual fund.
But before we get to that, let's understand how investing in a mutual fund is different from investing in a particular company by buying its equities. Agar aap koi company ke equity kharid te hai, then you become that company’s shareholder. You may even get voting rights. With your voting rights, along with other shareholders, you can influence the direction in which the company goes. However, when you buy shares in a mutual fund, you do not get any voting rights. Remember that a mutual fund consists of many equity-based and debt-based financial products. It is better to think of a mutual fund as a basket of different financial products which have been put together to both minimise their risk and maximize their returns.
Now let's get to the time when the net asset value, or NAV, of a mutual fund is most relevant to investors. That time is when he is about to clear his position, or when he is about to take a new position in a mutual fund.
Suppose you have found a mutual fund that you would like to invest in. Let's imagine that you have decided to get a hundred new shares in this mutual fund. How much do you have to put down to get the shares that you want? To answer this question, you will multiply the net asset value of that fund with the number of shares you want. If the mutual fund’s net asset value is 30 rupees, then you will have to put down 3000 rupees to get a hundred shares of that mutual fund.
Unlike the stock price, the net asset value of mutual funds is calculated only at the end of the day. This value does not fluctuate throughout the day like the value of stocks does. Agar aap liquid mutual funds mein invest kar rahe hain, aur agar aap 2 PM se pahle mutual fund application fill karke payment kar dete Hain, toh pichhle din ka net asset value applicable hoga.
Remember that the net asset value is only updated when the trading ends for the day. So if you finish all the procedures before 2:00 p.m. then the net asset value from the previous day will be considered. However, if you finish all the relevant procedures after 2:00 p.m, then the net asset value of the same day will be considered. Since this net asset value is yet to be calculated the trade will only go through at the end of the day.
The rules change when you are looking to invest in equity-based mutual funds. The cutoff time, then, is 3:00 p.m. If you finish all the relevant paperwork and put down the investment amount before 3:00 p.m, then the net asset value of the same day is considered. However if you finish the paperwork after 3:00 p.m, then the net asset value of the next day will be considered.
चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।