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Fund Performance Check

What is Net Asset Value?

November 07, 2016

The net asset value (NAV) of a unit-linked insurance plan (ULIP)/ mutual fund is the total value of its holdings net of admissible expenses.

The NAV is calculated by adding the ULIP / mutual fund's holdings as on a particular day less all liabilities like management fees, operating expenses, marketing expenses , among other permissible expenses and charges.

The net asset value represents the value of the total holdings of the ULIP / mutual fund.It may be divided by the number of units held by investors and, thereby, represent the net asset value per unit (NAV/unit).

This can be understood easily with the help of an example.

Let us take a ULIP launched by ABC Life. This is how its NAV is typically calculated.

ABC Life ULIP has total holdings as on date of Rs 11 lakhs

Less: Related Expenses Rs. 1 lakh
Net Asset Value Rs. 10 lakhs
No. of units Rs. 1 lakh
NAV per unit Rs. 10

There is some misconception with regards the NAV. Investors perceive a higher NAV as being 'expensive' and may choose to give the investment a miss. They may settle for an investment with a lower NAV because it's 'inexpensive'.

As we have seen the NAV is merely the book value of the ULIP/ mutual fund's investments minus expenses. It is not inflated nor is it misrepresentative. It represents the fair price of its assets should the mutual fund liquidate all its investments on that day. Investors need not be concerned about the price being too high or low. Therefore, a higher or lower NAV holds no significance and should not be the basis for identifying the right ULIP / mutual fund.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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