What is Mutual Fund?
Mutual Funds are pooling of funds where the funds are managed as assets by a separate entity through investments in the stock market or the debt instruments as prescribed in the offer document. Such separate entity is called the Asset Management Company and all the investments in the fund by the general public are called assets.
What is NAV?
NAV is called the net asset value for the money invested by the public in the funds. The Mutual funds are purchased in the form of units and each unit is valued at some price at the time of purchase. Such value is called the Net Asset Value of the Unit for that fund. The Investment amount or the Payout both are calculated based on this NAV multiplied by the number of units.
Asset Management Company(AMC)
Asset Management Company solely works with the amount handed over in the form of assets and can charge the fees for managing the fund. It invests daily into the instruments and daily profits and losses are account for in the funds, hence the daily NAV is calculated at the close of the stock market trading hours. This value is used as the base value for buy or sell of Mutual fund units at any point of time. In case of closed ended mutual funds the value is calculated at the end of the lock in period and for the open ended schemes the previous day closing unit price is calculated.
NAV indicates the position of the amount invested by the persona and as an instrument how much can be realized at that point of time. Calculation of this value takes into consideration the expenses of management of the fund, the takes if any etc.
Tax Saver Funds
Mutual funds are popular investment and tax saving instruments and helps the financial institutions to mobilize large funds. The Net Asset Value is subject to the market risk and fluctuates with the rise or fall in the stock market where the funds are invested.