Net Asset Value (NAV) is the key metric used to determine the value of a mutual fund or exchange-traded fund (ETF). It represents the per-unit market value of all the assets held by the fund after deducting its liabilities. Investors often use NAV to evaluate how much one unit of a mutual fund is worth at the end of a trading day, making it a crucial indicator for fund performance tracking.

The NAV is calculated using the formula: NAV = (Total Assets ñ Total Liabilities) / Number of Outstanding Units. Here, total assets include the market value of the fundís securities, accrued income, and cash, while liabilities comprise expenses and other payables. NAV is usually computed once every business day after the market closes, ensuring all asset values reflect the latest market prices.

Changes in NAV reflect the day-to-day market fluctuations of the underlying securities, not the demand and supply of fund units. Unlike stock prices that vary throughout the day, mutual fund units are bought or sold only at the end-of-day NAV. Therefore, NAV should not be mistaken for a fundís market price or a measure of profitability.

For investors, understanding NAV helps in making informed decisions about mutual fund investments. A higher or lower NAV doesnít indicate whether a fund is performing better or worseówhat truly matters is the fundís percentage returns over time. Regularly tracking NAV trends can assist in monitoring portfolio performance and aligning investments with long-term financial goals.

In summary, Net Asset Value serves as a transparent and standardized measure of a fundís value. It helps investors assess the fair worth of their holdings and ensures accountability in mutual fund valuation as per SEBI regulations.