KembaraXtra-Islamic Finance-Islamic Capital Market- Is NAV in Mutual Funds?

NAV stands for Net Asset Value.
It represents the price per unit of a mutual fund.


Simple Definition

NAV is the value of one unit of a mutual fund, calculated by dividing the total value of the fund’s assets minus liabilities by the number of units outstanding.


How NAV Is Calculated

Formula

{NAV} ={Total Assets} - {Total Liabilities}/{Total Units Outstanding}

What Counts as Assets

• Stocks
• Bonds / Sukuk
• Cash and bank balances
• Accrued income (dividends, profits)

What Counts as Liabilities

• Management fees
• Operating expenses
• Any short-term obligations

Simple Numerical Example

• Total assets of fund = $10,000,000
• Total liabilities = $500,000
• Units outstanding = 1,000,000

NAV = {10,000,000 - 500,000}/{1,000,000} = 9.50


👉 One unit of the mutual fund is worth $9.50.

How NAV Is Used

• Investors buy units at NAV
• Investors redeem units at NAV
• NAV is calculated once per day, usually at the end of the trading day

Important Points to Remember

• NAV is not traded intraday
• NAV changes daily based on:
– market value of assets
– income earned
– expenses incurred
• Mutual fund units do not trade in the secondary market


One-Line Exam Answer

NAV is the per-unit value of a mutual fund calculated as total assets minus liabilities divided by the number of units outstanding.