Understanding NAV: Key Figures Fund Investors Need to Know

When it comes to investing in (Mutual Fund) and ETFs, many people may wonder what the NAV figure represents and why investment information is as important as stock prices for investors. This article will help you understand what NAV is and why it is crucial to your investment decisions.

What is NAV: Total Asset Value at Market Price

NAV (Net Asset Value) or total asset value at market price is a measure that shows the total value of all assets held by the fund, after deducting expenses and all liabilities.

This figure is calculated daily by appraising the value of the fund’s assets based on current market prices (Mark to Market), then subtracting total liabilities. The result reflects the actual market value at each point in time.

By dividing the total NAV by the number of units issued, you get NAV per unit, which is the price used for buying and selling investment units. This number is updated daily according to changes in asset values.

NAV per unit vs. Stock Price: Key Differences

Although both NAV per unit and stock prices are used as trading prices, they originate from and have different meanings.

Stock price is determined through negotiation between buyers and sellers in the stock market (Exchange). This price reflects the demand and supply for that stock at that moment.

NAV per unit directly reflects the actual asset value held by the fund, based on the previous day’s closing price. A better comparison is that NAV per unit is closer to the book value per share (Book Value Per Share - BVPS) than the stock price itself.

How to Calculate NAV: Not as Difficult as You Think

Calculating a fund’s NAV follows this formula:

NAV = (Market value of assets + Accumulated returns and cash) – Total expenses and liabilities

Then, once the total NAV is obtained, divide it by the total number of units issued:

NAV per unit = Total NAV ÷ Total units issued

Example of NAV calculation

Suppose Fund X has the following assets:

• Real estate valued at 10 million baht
• Stock A with 1,000 shares at a closing price of 1,000 baht per share (Total 1 million baht)
• No liabilities, no expenses
• Total issued units: 200,000 units

Calculation:

• Total NAV = 10,000,000 + 1,000,000 = 11,000,000 baht
• NAV per unit = 11,000,000 ÷ 200,000 = 55 baht

As asset values change, NAV will also change accordingly. If the value increases, unit holders benefit; conversely, if the value decreases, it impacts the loss.

NAV indicates the fund’s operational performance

Investors can use NAV as a tool to assess how well the fund manages its assets.

Funds that can consistently increase NAV over the long term, especially when compared to similar funds with similar investment policies, demonstrate effective asset management. This often results in good profits for unit holders.

Conversely, funds with relatively stagnant or slow-growing NAV may indicate management issues. Investors can use this information to select suitable funds.

Important Cautions When Reading NAV per Unit

Although NAV is a useful tool, investors should understand:

The displayed NAV is historical data. The NAV per unit you see today reflects the previous day’s data. The actual purchase or sale price will not be known until the end of the day and will be announced as NAV the next day. Therefore, you cannot know the exact trading price before submitting an order.

NAV does not indicate whether a fund is expensive or cheap. A high NAV per unit does not mean the fund is expensive; it may be due to high asset values or a small number of units issued. When choosing a fund, consider asset quality, investment policy, and other conditions alongside NAV.

Some types of funds experience decreasing NAV over time. For example, leasehold real estate funds (leasehold rights) may see NAV decline to zero when lease agreements expire. Investors should carefully review these conditions before investing.

Summary: NAV is the Foundation of Fund Investment

NAV is a key figure that determines the trading price of investment units and directly affects investors’ profits or losses. Understanding how NAV is calculated, what it means, and its limitations will help you make smarter investment decisions and confidently access the world of fund investing.