Key Takeaways
- NAV (Net Asset Value) is the per-unit price of a mutual fund. This guide explains how NAV is calculated, what daily NAV changes mean, the common myth about high vs low NAV, and how NAV relates to your actual investment returns.
What is NAV in Mutual Funds?
NAV stands for Net Asset Value — it's the per-unit market value of a mutual fund scheme. Simply put, it's the price at which you buy or sell mutual fund units.
Formula: NAV = (Total Market Value of All Assets − Liabilities) / Total Number of Units Outstanding
How is NAV Calculated?
Mutual fund NAV is calculated at the end of every business day by SEBI mandate:
- Fund manager totals the market value of all stocks, bonds, and cash in the portfolio (using closing prices)
- Subtracts liabilities (management fees, expenses payable)
- Divides by the total number of outstanding units
- This NAV is published by 11 PM the same day and is the price for all transactions processed that day
The Big Myth: High NAV = Expensive, Low NAV = Cheap (WRONG)
This is the most common and costly mutual fund misconception. NAV tells you the current per-unit price — it does NOT tell you whether a fund is "expensive" or "cheap":
- Fund A: NAV ₹10 (new fund). Fund B: NAV ₹1,000 (10-year old fund)
- If you invest ₹10,000: Fund A gives you 1,000 units, Fund B gives you 10 units
- If both grow 20% next year: Fund A NAV becomes ₹12 (1,000 units × ₹12 = ₹12,000). Fund B NAV becomes ₹1,200 (10 units × ₹1,200 = ₹12,000)
- Returns are identical — NAV starting point is irrelevant
What matters is: the quality of the underlying portfolio and the fund's historical performance, not the NAV number.
NAV and Your Investment
When you invest ₹5,000 in a fund with NAV ₹100, you receive 50 units. When NAV grows to ₹120, your investment is worth 50 × ₹120 = ₹6,000. The growth in NAV = your returns.
Applicable NAV Rules (SEBI)
For equity funds:
- Orders placed before 3 PM cut-off get the SAME DAY's NAV
- Orders placed after 3 PM get NEXT DAY's NAV
- For large investments (₹2 lakh+), the NAV of the day the funds are realised applies
NAV in Dividend Plans vs Growth Plans
- Growth Plan: Dividends are reinvested. NAV grows continuously. No dividends paid out.
- IDCW Plan (formerly Dividend Plan): When fund declares dividend, the dividend amount is deducted from NAV and paid to investors. NAV falls by the dividend amount on ex-dividend date.
For long-term wealth creation, Growth plans are tax-efficient and generally better due to compounding.
Tracking NAV
- AMFI website (amfiindia.com): Official daily NAV for all funds
- Your fund house's app: Personalised NAV tracking
- Zerodha Coin / Groww: Real-time portfolio value tracking
