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Net Asset Value (NAV)

Net Asset Value, or NAV, is the per-unit value of a mutual fund. It reflects the total market value of all the fund's holdings minus expenses, divided by the number of units. Investors buy or redeem mutual fund units at the NAV, so it acts like the daily price of the fund. NAV is not a measure of how expensive or cheap a fund is. It simply shows the current per-unit value after accounting for the assets, liabilities and expenses inside the fund.

Formula: NAV = (Total Assets - Total Liabilities) divided by Total Units.

NAV at a glance

Understanding how NAV works helps you track the daily value of your mutual fund investments.

  • Daily update: NAV is calculated once a day after markets close.
  • Applies to all funds: Equity, debt and hybrid funds each publish their own NAV.
  • Unit pricing: When you invest, your units are allotted based on the NAV of that day.

What affects the NAV

  • Market movement: Changes in the prices of stocks or bonds held by the fund move the NAV up or down.
  • Expense ratio: Fund management fees reduce NAV slightly over time.
  • Interest and dividends: Income earned by the fund can increase NAV before distributions.
  • Cash flow: Large inflows or outflows may lead to rebalancing that affects value.

NAV and mutual fund investing

  • Not like stock prices: NAV does not move in real time and is calculated at the end of the trading day.
  • More units vs higher NAV: A lower NAV gives you more units, but the return depends on the fund's performance, not the NAV alone.
  • Systematic investing: SIPs buy units at different NAVs over time, averaging the purchase cost.
  • Performance tracking: Compare growth by percentage returns rather than just NAV levels.

Key reminders before you use NAV

Focus on returns

A high NAV does not mean an expensive fund; performance matters more than the absolute NAV figure.

Know the cut-off time

Investment cut-off times decide which day's NAV you receive, especially for lumpsum orders.

Track consistency

Steady growth in NAV over years can signal disciplined fund management.

Risks & what to watch

  • Short-term focus: NAV can swing daily, so short-term comparisons can be misleading.
  • Ignoring costs: Expense ratio eats into NAV; compare funds with similar objectives.
  • Misunderstanding value: A low NAV is not always a bargain; look at the fund's strategy and performance.
  • Tax impact: Redemptions may trigger capital gains tax based on holding period.