Table of Contents
Quick Answer
NAV in a unit trust means net asset value: total assets minus total liabilities. The fund's price per unit is its net assets divided by the total number of units issued.
NAV is calculated after each trading day using the closing market prices of the securities in the portfolio. A fund therefore has only one NAV a day, so there is no need to keep checking the app several times.
NAV alone, a distribution or a fall in price is also not enough to tell you whether a fund is worth investing in.
What Fund NAV Means, How It Differs from Share Prices and Common Misconceptions
Why should you understand NAV?
Many people are introduced to apps such as VERSA and ASM. After joining, they may also be attracted to other products in the app and buy variable-priced funds such as VERSA Growth or ASN Equity Global.
Some people enter the app several times a day. When the price rises, they feel they chose correctly; when it falls, they become anxious and complain.
If a fund's price has fallen, is it time to buy?
If a fund pays an income distribution, does that mean you should buy it?
This is a useful opportunity to understand fund NAV correctly.
What is NAV?
If you look closely at a fund, you will see that it uses NAV, or net asset value.
Net assets equal total assets minus total liabilities. The fund's “share price” is its NAV per unit: net assets divided by the total number of units issued.
NAV is calculated after each trading day using the closing market prices of the securities in the portfolio.
A fund therefore has only one NAV a day, so there is no need to keep logging in to check it.
The NAV you see in the morning may be from two days earlier, while the one you see in the afternoon may be from the previous day. A fund that invests overseas may take longer.
How does fund NAV differ from a share price?
| Fund NAV | Share price |
|---|---|
| Only one price a day | The price changes while the market is open |
| Not directly affected by supply and demand | Affected by supply and demand |
| You may buy or sell at any time | Someone must sell before you can buy, and vice versa |
| The NAV shown may be one or two days old | The price is live while the market is open |
| A purchase or sale before the cut-off uses that day's NAV | A trade happens when the prices match |
Common misconceptions about fund NAV
Buying because the fund is about to make a distribution.
A distribution may be welcome, but the NAV falls after it is paid because the distribution is also deducted from the asset value. Buying only because a distribution is coming is therefore not meaningful.
Buying simply because a fund's price has fallen sharply.
That may sometimes be considered for an individual share, but not necessarily for a fund.
A fund manager may change the portfolio according to market conditions, and the companies held by the fund may also be different. NAV alone is therefore not a good measurement.
What are better ways to assess a fund?
The measures can generally be divided into two groups:
- Quantitative measures: annualised return, Sharpe ratio, alpha, beta, R-squared and allocation;
- Qualitative measures: the fund manager's strategy, approach and experience.
Then compare funds of the same type, such as funds that both invest in the Malaysian share market.
If the investment amount is large enough, remember to build a portfolio to diversify risk across different countries, sectors and types of funds.
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About the Author
Remuneration Disclosure
If you choose to arrange insurance, unit trusts or PRS through me and FA Advisory, I may receive commission from the relevant product provider. This commission is calculated separately from the financial-planning fee and does not offset or replace the planning fee. I will also explain the relevant arrangement and potential conflict of interest before implementation.
Read How YFD Makes Money for the full disclosure.
Sources and Notes
This English article is a faithful translation of YFD's already-published Chinese post, 基金入门干货 2️⃣ 什么是基金的 NAV？ (published 19 September 2022, updated 24 May 2024). It is an educational opinion article and cites no external sources.
Educational Purpose
This article is for general reference only and does not constitute investment advice. Check the relevant fund documents and platform rules for the fund's actual valuation, transaction timing, distributions and performance measures.
