What is NAV (Net Asset Value)?
Demystifying Net Asset Value. Learn how the fundamental per-unit price of a mutual fund is calculated and what it means for your portfolio.
In the world of mutual funds, NAV stands for Net Asset Value. Just as a stock has a share price, a mutual fund scheme has an NAV, which represents the performance and market value of a single unit of that fund on any given day.
How is NAV Calculated?
At the close of every trading day, mutual fund houses calculate the total market value of all the securities (stocks, bonds, and cash) held in a fund’s portfolio. After deducting the fund’s daily operational expenses and liabilities, this net amount is divided by the total number of units held by all investors.
The Simple Formula
NAV = (Total Assets – Liabilities & Expenses) ÷ Total Number of Outstanding Units
This calculation is refreshed at the end of every business day, meaning your fund’s value updates once daily after the markets close.
Common NAV Myths vs. Reality
Myth: A Low NAV is Always “Cheaper” and Better
Many investors mistakenly treat mutual fund NAVs like stock prices, believing a fund with an NAV of ₹10 is a better bargain than a fund with an NAV of ₹100. This is a misconception. A lower NAV simply means the fund is newer or has fewer assets per unit—it does not indicate that the fund is undervalued or superior.
Reality: Performance is About Percentage Growth
What truly matters is how much your investment grows in terms of percentage, not how many units you buy. If you invest ₹10,000 in a fund with a ₹10 NAV, you get 1,000 units. If you invest ₹10,000 in a fund with a ₹100 NAV, you get 100 units. If both funds grow by 10%, your investment in both becomes ₹11,000. Your net wealth creation remains identical.
When Do You Get Today’s NAV?
Because NAV updates daily after market hours, your transaction timing matters. If you submit your purchase or redemption request before the regulatory cut-off time on a business day, you get that day’s closing NAV. If you submit it after the cut-off time, your transaction is processed using the next business day’s NAV.
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