I have a query regarding the Net Asset Value of mutual fund units. The NAV for the growth option is more than 10 times in some cases and it is only three to four times in some cases. How is it possible?
- Anil
The Net Asset Value (NAV) is the worth (in market terms) of each unit of the fund. It is calculated as the market value of all investments in the fund less liabilities and expenses divided by the outstanding number of units.
Dividend option in a fund pays a share of profit to its investors as dividends. Fund may distribute dividends monthly, quarterly, annually or at any time on the discretion of the fund. The NAV of the scheme falls after the payment of dividend. The extent of the fall depends on how much dividend is paid and how many times it is paid. That explains the difference in NAV of growth and dividend options.
This article was originally published on October 09, 2015.
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