Knowing your mutual fund’s NAV helps you track its performance and even effect minor tweaks wherever necessary to optimise its growth.
Most investors who enter the mutual fund universe have some trepidation about being able to understand what’s going on with their investments. They rely heavily on inputs from their fund managers to realise the highest growth on their money. However, they can exercise some modicum of control over the funds they invest in, by checking the NAVs on them.
The NAV (Net Asset Value) of the mutual fund scheme is one of its most important components. It is the price at which you buy or sell the units in that MF. It is an important barometer of the scheme’s growth, and knowing it is important.
But why should you know the mutual fund NAV? Consider the most important reasons:
* The MF NAV lets you know the value of your securities. The primary reason to know your MF NAV is to know the composite value of all the securities that you own. Be sure to include cash in the securities when you track the NAV history as well as latest NAV. The mutual fund NAV is computed based on the per unit price after deducting debts from the asset value. From this resulting figure, divide the number of units you hold in the fund. This final number is the NAV of the mutual fund. The higher the MF NAV, the better is the fund performance.
* The NAV helps you decide when to buy or sell. There may be a time when you wish to buy a new mutual fund scheme, or redeem one that you hold, based on market conditions and your need at the time. The best way to determine the best buying and selling times, is to note the MF NAV at that point. NAVs rise when rates rise, and they drop when rates drop. So, you if you have been tracking the NAV history and also the daily NAVs, you will better determine the key points in the business cycle for redeeming or buying a new scheme. Do note that the MF NAV sets the price for buying or selling, and there is also an exit load when you sell the fund.
* The NAV lets you see if the scheme is doing as well as it should – or not. Tracking the NAV over a period of time helps you gain inputs on how the fund is performing in the given market conditions. Consistently high MF NAVs indicate that the fund is doing well despite highs and lows from the market, whereas NAVs that dip spell potential losses in your earnings. The latest mutual fund NAVs and NAV history can help you tap the fund’s growth and take remedial action wherever needed.
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