Mutual fund assets usually fall under two categories – securities & cash. Securities, here, include both bonds and stocks. Therefore, the total asset value of a fund will include its stocks, cash and bonds at market value. Dividends and interest accrued and liquid assets are also included in total assets.
Also, liabilities like money owed to creditors, and other expenses accrued are also included. Now the formula is:
Net Asset Value (NAV) = (Assets – Debts) / (Number of Outstanding units)
Here:
Assets = Market value of mutual fund investments + Receivables + Accrued Income
Debts = Liabilities + Expenses (accrued)
The market value of the stocks & debentures is usually the closing price on the stock exchange where these are listed.
The mutual fund itself and/or certain accounting firms calculate the NAV of a mutual fund. Since mutual funds depend on stock markets, they are usually declared after the closing hours of the exchange.
All Mutual Funds are required to publish their NAV at every business day as per SEBI guidelines.
Also, NAV is obtained after subtracting the expense ratio of a fund. This expense ratio is the total of all expenses made by the mutual fund annually, including the operating expenses and the management fees, distribution and marketing fees, transfer agent fees, custodian fees and audit fees.
