Investing in mutual funds might seem complicated, but understanding key terms simplifies things. Net Asset Value (NAV) is fundamental. Let's explore what it is, how it's calculated, and its importance.

What is NAV? Think of a mutual fund as a pool of money from many investors, invested in assets like stocks and bonds. NAV is the per-unit price of the fund, representing each unit's value. Unlike company shares traded all day, mutual fund units are usually bought and sold at the day's closing NAV

How is NAV Calculated?

Let's use a simple example:

Imagine a mutual fund holding PKR100 million in assets (stocks, bonds, and cash), with liabilities (expenses and fees) of PKR 5 million. If 95 million fund units are outstanding, what's the NAV?

How does NAV affect portfolio performance?

NAV, or net asset value, is the key measure of your mutual fund's performance. Here's why:

Buying and Selling: You buy fund units at the current NAV and sell them at the NAV on the day you redeem.

Growth Tracking: A rising NAV shows growth in the fund's assets, increasing the price per unit. A falling NAV indicates depreciation.

Return Calculation: Your returns directly reflect NAV changes. Selling at a higher NAV than your purchase price means profit. For example, buying at PKR 1.00 and selling at PKR 1.10 yields a 10% return.

Understanding NAV lets you monitor your fund's performance and make smart investment choices. It's your fund's daily value,showing its holdings' success. Regularly check the NAV to assess your investment's progress.