Process of the Mutual Fund’s NAV Pricing


Mutual funds allow its investors to redeem the fund units each business days. Thus, makes the mutual fund investment as liquid investment. Mutual finds continuously offer the new units to you. Mutual fund process request for redemption and the exchange as the normal part of daily business activity.

Investor invest money into the pool of funds which then converted into the standard units so as to inform investor regarding the investment on any particular day to keep track of the investment. Pool of funds earn interest and dividend on the investment which you hold as investor.

Realized Capital Gain: Whenever investor purchase and sell investment then it can be denoted as realized capital gain

Realized Capital Loss: When investor incur capital loss then this loss is called as realized capital loss. Similarly, investment owned by the pool of funds can raise or down significantly then this can be called as valuation gain and valuation losses.

Your investment can be marked as successful only when you’re gaining below things after your initial investment:

  • Interest on the invested money.
  • Dividend income
  • Realized capital gain
  • Valuation gain

Similarly, your investment can be marked as failure, with respect to the following measures:

  • Realized capital losses
  • Valuation loss

What is NAV:

When you’re holding the units of any fund as investor. There’s a valuation of that particular unit. This valuation is called as NAV which is further called as Net Asset Value.

You might have heard NAV term multiple time. This NAV is belonging to the funds. NAV denotes the price of each fund unit in the current market. NAV can be calculated as,

NAV = Current market value of asset – fund liabilities (fund expenses) % Total number of outstanding units

What is Marketing to Market:

Market value of the investment are determined at the time of the closing market prices. This is process called as marketing to market where the asset value is defined at the end of market close price.

NAV is the price of the mutual fund units, at this shown valuation investor do invest his heard owned money. So, it is important to reflect the actual value of each unit. Buying and selling of mutual fund is solely depend on the information contained in NAV.

Valuing shares of a company at their acquisition cost, $150 is meaningless if those shares are already appreciated to high valuation, $500. When NAV starts capturing the stock movements then only it is meaningful for you.

Marketing to marketing is a methodology which will help you to buy and sell units at the right valuation. This can be simply calculated,

Net Asset = Market value of your investment + current, other assets + accrued income -current, other liabilities – accrued expenses.

Above calculation will help you to determine the identical unit value of the mutual fund.


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