What are Net Assets? This is Following Explanation and Use

The word asset of course often heard especially in accounting discussions, which show assets or assets owned by individuals and companies. The net asset value is basically the sum of all assets, that reduced obligations that must be paid such as debt or expense.

In the case of financial practice, net asset often used as the base value for the type of mutual fund investment.

In this article, we will review more deeply the value of net assets and how they are applied in financial studies.

Mutual Fund Investment

Before entering into a discussion of net assets, we need to first understand mutual fund investments in which there are concepts inside. Investment indeed as proof as a way to increase income more effectively, at least compared to just saving money in the bank. One type of investment that is easy to do and has a relatively small risk is mutual fund investment.

In simple terms, mutual funds are you giving money to Investment Managers to be managed in the capital market on various investment instruments. Investment in mutual funds may still be relatively new and there are still not many familiar with it, because this investment grows along with the development of the capital market and the stock exchange. But compared to other capital market investments, mutual funds have the lowest risk and are certainly safer.

You can start investing in mutual funds by spending only a small capital of $ 10. But like other investments, the lower the risk you take, the lower the benefits that may be obtained, small money invested, hence will get small profit obtained, and vice versa, greater money that invested hence will obtain higher profit too.

Make sure you have consulted with a credible investment manager or trusted financial expert before investing to avoid the risk of loss.

Net Asset Value

In the practice of mutual fund investment, there are sentences that we often heard namely Net Asset Value (NAV).

NAV is the total funds in mutual funds based on the value of assets owned such as stocks, bonds, etc. after deducting operational costs.

NAV shows the total funds owned by investment fund management companies or companies where investment managers manage incoming investment funds.

Calculation of NAV for mutual fund companies is based on Fair Market Value (FMV) which shows the price of the current transaction, where the value can change every day. As with currency rates, the changing value of FMV then affects the NAV of a mutual fund, which means it will continue to change as well. But you can access information about this NAB through various means such as newspapers or websites that always provide updates with every Monday to Friday.

Usage of Net Asset Value

Net Asset Value (NAV) is used as the basis for determining the price of an investment unit in mutual funds, known as NAV / Unit of Participation (UP) or often also called NAV / Unit.

NAV / Unit calculating of total assets in a mutual fund company that has been reduced by operating costs, then dividing the number Unit of participation. (shares or other investment instruments) owned.

So when you want to know the price of an investment unit in a mutual fund company, you can just look at the NAV / UP data from that company.

Just like the NAV value, the NAV / UP value also changes every day because of course it is also based on the Fair Market Value (FMV) calculation that is currently in effect.

In addition, the value of NAV / UP will possible to change, because of the changes factor funds that managed by the Investment Manager,  which Asset Under Management (AUM) increasing the value.

But just like NAV information, you can easily get information about NAV / UP from various means. The mention of NAV / UP itself is referred to by many people with NAVs, which although it has different meanings, is understood by the majority of investment actors.

NAV / UP is actually not providing information about the benefits that you can get directly from mutual fund investments, but it helps in the process of implementing the investment itself. By knowing the NAV / UP, you can estimate how many investment units you can buy with the funds you have. This then helps how the investment plan is right for you to do, and estimates of the benefits that might be obtained indirectly.

For example, the NAV / UP of a trusted mutual fund company that you will enter an investment of $ 1,108.91 per unit. You can invest directly a number of funds or choose to buy per unit. If you want to directly invest $ 1,000,000 in funds, for example, you can get around 901,7864 units. Or you want to buy 1,000 units directly, so you need to invest $ 1,108,910.To see the calculation of the possible benefits to be obtained, you can see the NAV / UP value information that is being applied then compared to what the value is when you buy. Comparisons or differences in values that occur that can then be a measure of the estimated benefits that you might get. However, it is best to invest in mutual funds or other investments in general, you do not directly sell it and leave it for about five years so that the benefits are more significant.

The final word

This is the discussion about Net Asset Value (NAV) and its use in mutual fund investments in the capital market.

Gathering and knowing as much information as possible is very important before you make an investment.

With hopefully so that the investments made can be right and certainly make a profit. Do not hesitate too to consult with a financial expert who is an expert so that you do not misstep in investing. Hopefully, this information is always useful and successful!

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1 Response

  1. November 19, 2018

    […] What are net assets?This is following explanation and use […]

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