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In the vast world of finance, understanding terms like Net Asset Value per Share (NAVPS) is key for making smart investment choices. In this blog, we unveil Net Asset Value Per Share (NAVPS), giving you the knowledge to sail through your financial journey with confidence.
What is Net Asset Value Per Share (NAVPS)?
Net Asset Value Per Share (NAVPS) is like a spotlight in a busy market where mutual funds, exchange-traded funds (ETFs), and closed-end funds gather. It represents the value of each share in these funds, calculated by weighing the total value of their investments and dividing it by the number of shares available.
Formula: Net Asset Value Per Share (NAVPS)
The Net Asset Value Per Share (NAVPS) is calculated by dividing the total Net Asset Value (NAV) by the existing number of shares outstanding.
To find NAVPS, use a simple formula:
Net Asset Value Per Share= NAV/ Number of outstanding shares
Let’s break it down, where:
NAV= Total assets- Total liability
- Total Net Assets: This is the sum of everything the fund owns
- Total liabilities: Expenses or debts. It’s the raw value of all the fund’s holdings.
- Number of Shares Outstanding: The total number of shares available for purchase or trading in the fund.
Example of Net Asset Value Per Share (NAVPS) Calculation
Imagine ABC Mutual Fund has assets (Cash: 50 lahks, Stocks: 1Cr, Bonds: 50 lahks), liabilities (Outstanding Expenses: 20 lahks, Loans: 30 lakh), and there are 20 lakhs shares outstanding. Calculate the Net Asset Value Per Share (NAVPS) for ABC Mutual Fund.
Solution:
=> Shares outstanding = 20 lakh
Net Asset Value (NAV) = Total Assets−Total Liabilities
= (50,00,000+1,00,00,000+50,00,000) – (30,00,000+20,00,000)
= (2,00,00,000 – 50,00,000)
Net Asset Value (NAV) = 1,50,00,000
Now, that we have the Net Asset Value, we can use the formula for NAVPS:
Net Asset Value per Share (NAVPS)= (Net Asset Value) / Number of outstanding shares
= 1,50,00,000/ 20,00,000
Net Asset Value per Share (NAVPS) = Rs. 7.50
The Net Asset Value Per Share (NAVPS) for ABC Mutual Fund is Rs. 7.50. This means that for each share, the fund’s underlying assets are valued at Rs. 7.50 after accounting for liabilities.
Why Does Net Asset Value Per Share (NAVPS) Matter?
- Valuing Investments: NAVPS helps investors understand the current value of each share in a fund. It’s like checking the price tag on each basket of investments in the market.
- Making Informed Choices: Investors use NAVPS to compare the value of different funds. It’s a tool that guides them in deciding where to invest their money wisely.
- Monitoring Performance: Changes in NAVPS over time indicate how well a fund is performing. It’s like watching the scoreboard to see if the team is winning or losing.
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FAQs
1. What's the difference between NAVPS and market price?
2. Does a higher NAVPS automatically mean a better investment?
3. How often is NAVPS updated?
4. Can I simply buy a fund at its NAVPS?
5. How can I find a fund's NAVPS?
6. Are there any limitations to using NAVPS?
Conclusion
In the intricate world of finance, grasping the concept of Net Asset Value per Share (NAVPS) is like having a reliable compass. It sheds light on the value of each share in a fund, aiding investors in making informed decisions. As you journey through the financial landscape, understanding NAVPS serves as your guiding star, helping you assess investments, make wise choices, and monitor fund performance. Fear not, for with NAVPS knowledge, you navigate with confidence, ensuring a smoother and more informed financial voyage!