NAV, EXPENSES, ETC OF 
  MUTUAL FUNDS
   NET ASSET VALUE
   • Price of is stock is determined by demand and supply 
    forces.
   • On the other hand, a mutual fund’s value is determined by 
    how much is invested in the fund as well as the costs to 
    run it, and its number of outstanding shares.
   • Value of assets = value of all securities in the portfolio
   • Value of liabilities =  value of all liabilities and fund 
    expenses 
   • The NAV of a fund is the fund’s per share market value
   • It is the price at which an investor would buy from or sell 
    to the fund company.
   • NAV per unit tells us how much one share of the fund is 
    worth. 
  NET ASSET VALUE…. contd..
  • NAV per unit = Net Asset Value of the Fund 
   / Number of Units Outstanding
    • Net Assets = [ Market Value of Investments + 
    Receivables + 
       Accrued Incomes + Other Assets ]
        -
       [ Accrued Expenses + Payables + Other 
    Liabilities ]
  EXAMPLE
  • Value of securities = Rs. 75 lakh
  • Cash = Rs. 15 lakh
  • Accrued income = Rs. 24 lakh
  • Short-term liabilities = Rs. 1 lakh
  • Long-term liabilities = Rs. 12 lakh
  • Number of outstanding shares = 20 lakhs
  • NAV per unit = [Rs. 75 lakh + Rs. 15 lakh + Rs. 24 
   lakh ]- [Rs. 1 lakh + Rs. 12 lakh] / 20 lakhs
  • NAV per unit = Rs. 101 lakh/20 lakh = Rs. 5.05 
   per unit
   COSTS INCURRED BY MUTUAL 
   FUNDS
   • Every mutual fund house incurs expenses. 
   • According to rules, mutual funds deduct a small portion from 
    investors’  investments to pay for these expense
   • Equity funds are allowed to charge up to 2.25% of the assets 
    that a scheme manages.
   • Debt funds’ expenses are capped at 2%. 
   • The lower the expense ratio of a scheme, the higher the NAV.
   • “However, while expense ratio is important, it should be 
    borne in mind that it is not the only criterion while selecting 
    mutual fund scheme. A scheme with a consistently decent 
    track record, but a higher expense ratio may be better than 
    the one which lower expense ratio, but gives poor returns”. - 
    AMFI