Understanding Net Asset Value (NAV) Net Asset Value (NAV) represents the value of a fund after deducting expenses and liabilities. It is calculated as total assets minus total liabilities divided by outstanding shares or units. NAV reflects the fair market value of investments, crucial for investors to assess their holdings in mutual funds or hedge funds.
Role of Fund Managers and Expenses Impact on NAV Fund managers handle investor contributions, investing them across various sectors like banking, IT, manufacturing using instruments such as bonds and equities. These activities incur costs—management fees, legal charges—which are deducted from the fund's assets before calculating NAV. Changes in income sources like dividends also influence overall asset values.
Mutual Funds vs Shareholders: Key Differences While both represent ownership stakes, mutual fund unit holders lack voting rights unlike shareholders who own company equity with additional privileges. Mutual funds divide investment into units representing proportional ownership without direct control over underlying companies' decisions.
'Units': The Building Blocks of Mutual Funds 'Units' symbolize fractional ownership within a scheme; they simplify allocation among multiple investors while enabling trading flexibility akin to stocks via ETFs if listed publicly on exchanges.