Critically evaluate NAV of a Mutual fund.

Expert Solution

NAV Is value of one unit of mutual fund. It is the price at which one can buy unit of mutual fund. In otherwords it reflects the composite price of all the asset held by mutual fund. Simply put if asset held by mutual fund rises so thus the NAV if it falls NAV will fall. It is compulsory for mutual fund to declare value of NAV on daily basis
For example if one want to invest 10,000$ in mutual fund having NAV of 200 then he will receive 50 units of that fund.
It is important to note that as oppose to stock , dividend are declared on per unit basis. ie 5 $ per unit

NAV is calculated as follows

NAV (Net Asset value) = Asset less liability/ no. of units

Asset of mutual fund are mainly stocks and liquid cash.Debts include money owed for outstanding liabilities and expenses. All accrued expenses are included in this
Thus higher NAV only shows that the mutual fund has performed well but it does not reflect future prospect of the fund

jeff jeffy answered 1 year ago

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