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What is NAVPS?

Mutual funds are basically baskets of stocks managed by a professional fund manager. Investments in the fund are purchased by investors as share units. Each unit represents a fraction of every investment in the fund’s portfolio, or a miniature of the full portfolio.

The value of your fund unit is called the net asset value per share (NAVPS). You can calculate the NAVPS by dividing the fund portfolio’s total value (total assets minus total liabilities) each day by the total units issued by the fund. For example, if the fund’s portfolio is worth $100,000 and there are 100,000 units outstanding, the NAVPS is $1.00 ($100,000 divided by 100,000 units). The value of each unit fluctuates with changes in the value of the investments pooled in the fund. If the value of the basket of companies rises, your unit value will also rise. If the portfolio dips in value, your unit value will fall. All funds must compute the NAVPS at least once a month. New rules require that equity funds calculate their values weekly, but most large funds calculate the NAVPS each business day after the markets have closed. The fund’s NAVPS is usually calculated daily at the end of the trading day. That is why you often see the price of your fund units change from day to day. When you sell fund units, the amount you receive depends on the market value of the units at the time of sale, which may be less or more than you paid. Mutual funds are highly liquid investments and most fund companies will redeem share units the same day or on the following business day. If a fund computes its NAVPS less frequently than daily, however, sales and redemptions will be made on the next valuation date. If computed monthly, a fund may require that requests for redemption be submitted up to ten days before the date of the NAVPS computation. Real estate funds must compute NAVPS at least once a year.