Introduction:
Are you interested in mutual funds? Are you new to the mutual fund investment world? In case it is so, I am sure that you have heard about the term NAV. Wait on! It's not rocket science but it is simple. In case you are confused with the term NAV then this is the place to be, read the blog and find your answers.
Meet Varun Hiremath:
You might be thinking why I am swapping my pen to Varun Hiremath! He is perhaps the best individual in the country who can explain in the most effortless, but effective way what NAV is and how it functions. Varun Hiremath is the founder and the CEO of The Fair Deal Wealth Advisors and the renowned finance guru of our nation, he has his own special style of wealth management. Varun Hiremath explains why a mutual fund investor, even a beginner should educate himself about the concept of NAV.
What is NAV: There are many people who are very much familiar with mutual funds but don't have enough knowledge on finance management and those guys who have interest in mutual fund investments but don't know what the term NAV actually means. Here's the answer for you all: NAV is the short term of NET ASSET VALUE.
The term NAV is used in a single sentence to represent the price of a unit of any mutual fund. It figures out the base value of your investment on any given day of investment. There is a simple formula that we use:
NAV = (Market Value of Securities – Liabilities) ÷ Number of Units Outstanding
This formula is a one stop solution to all the mutual fund investors. AV in actual sense indicates the cumulative amount of all your investments or holdings less the amount of any debts which is divided by the amount of funds issued against your name( your investments). When you compute in this manner the outcome will manifest the worth of a single unit or share or investment you make. Is it not simple, you have an answer to what NAV is. It is the easiest but effective method to compute the net worth of your investments.
How Does NAV Affect Your Investment?:
Does NAV affect your investments? Let’s find out the answer. Review the following example, which shows the effect of NAV on your investment. Assume that you have invested 10,000 in a mutual fund and the NAV is 20 per unit.
- Investment: ₹10,000 ÷ ₹20 (NAV) = 500 units.
Now watch and see whether the NAV of a fund rises to 25 the next day! You do not need to search or make any calls but just to use our formula. It will tell you the value of your 500 now:
- New Investment Value: 500 units × ₹25 (NAV) = ₹12,500.
It will give a clear indication of how your investment has increased and you have made a profit. Isn't it simple! It is just that simple all you need to do is use our formula and it will help you calculate and comprehend how NAV influences your investments.
NAV: Price vs. Value:
The new investors often make a common mistake. They think that a higher NAV means a better fund which is totally wrong. It's not true! Look at this example, a fund with an NAV of ₹200 is always "better" than a fund with an NAV of ₹20, isn't it! But you must understand that NAV just reflects the price per unit but it never can pull out the full picture of your fund's potential!
Your fund's performance depends upon the market over a period of time. So it is more important how the fund performs. So don't focus on the value or price but try to read the quality of the fund’s portfolio and how well it fits with your investment goals, and keep an eye on how it is performing in the long term run.
Why Track NAV?
Investors often track their NAV, it is really important as it helps you to understand how your investment is performing. It is simple to understand that when your NAV is going up your investments are growing. But you must understand that NAV only reflects the current worth of your fund's units, but it doesn't reflect the actual value at which you bought them. So we must agree to the fact that it's a useful method to track the progress of your investments but you must not focus on it always, because it can fluctuate anytime so give your investments time. Don't focus on earning a short term return by calculating the NAV. It may grow anytime but if you stop your funds you can miss out the future potential of earning more.
Varun Hiremath, is an exceptional market analyst and investment strategist. He is the founder of Fairdeal Wealth Advisors. The Fair Deal is the leading wealth management organisation of India led by the financial expert Varun Hiremath who very often says that “successful investing isn’t about obsessing over daily NAV changes”. “It's about maintaining discipline and focusing on long-term growth”, these are not mere words but these are expert advice and instructions that have helped thousands to earn long term benefit. You must not get afraid if the market deepens, it's a matter of realization that Mutual funds are designed to help you grow your wealth over time. NAV is just the way to track the performance of your funds.
Long-Term Focus: The Key to Successful Investing:
It's always good to keep your eye on NAV,but you must remember that investment is a marathon, it is not a matter of goldrush. The small daily fluctuations in NAV may affect your mind, you may consider it alarming, but remember these are just short-term noises,so don't listen to them. You just have to keep an eye on what really matters, that is the fund's overall performance, and how well it fits with your financial goals of the future.
Varun Hiremath also ensures that his clients have a clear picture of the NAV, but he also makes his clients understand the bigger picture of the future. He tells his clients to keep an eye on long-term returns, his advice assists them to keep an eye on the long-term returns. His customers do not fall prey to the short term fluctuations of the market.
Types of Mutual Funds and How NAV Works for Them:
Here’s a simplified explanation of the types of mutual funds and their interaction with NAV:
- Equity Mutual Funds: AV fluctuates with the bull and bear markets. It is best in terms of long-term growth, but a bit unpredictable in the short term.
- Debt Mutual Funds: The interest rates as well as the performance of the fixed-income assets influence AAV. Generally more stable compared to equity funds.
- Hybrid Mutual Funds: A mix of both equity and debt investments. NAV is purely based on both, giving it a balanced risk/return combination.
- Index Funds: NAV follows a specific market index's performance. Changes are steady and cost-effective, with passive management.
- Liquid Funds: The NAV remains relatively fixed since these funds invest in short-term securities that are of low risk. Great for short-term investments.
- Sectoral Funds: AV is highly unstable, depending on the performance of a particular industry. These have a greater risk but may also yield better results given the success of the sector.
We must remember that each and every fund category has their own way of impacting NAV, so it is really important to pick the correct one that aligns with your future financial goals, and you must have the mental strength to endure risks.
Final Thoughts:
It is important to understand NAV and it is really simple. It is a simple yet important part of investing in mutual funds. It helps the investors track the current value of their fund's units and it gives a hint on how their investments are performing. But you must remember that. But to achieve your future financial goals you must invest intelligently and to achieve long term benefit you must have patience, discipline, and focus on long-term growth. By following all these things you can make a better tomorrow for you and your family. If you have any questions or doubt about wealth management Varun Hiremath is always there to help you to achieve your financial goals.
Are you looking to invest in mutual funds?
Looking forward to making your financial future secure?
Then you are in the right place, don't delay, visit Varun Hiremath’s official website or search in Google. All you need to do just write “Varun Hiramath” or “Fair Deal Wealth advisors “ and search, he and his team of experts are always there to help you with expert and effective insightful financial advises.
