What is NAV (Net Asset Value)? A Simple Guide
NAV, or Net Asset Value, is the per-unit price of a mutual fund. It is the fund's total assets minus its liabilities, divided by the number of units. You buy and sell fund units at the NAV, which is calculated once each business day after markets close.
Every mutual fund has a price called its NAV. It is the single most quoted number about a fund, yet it is widely misunderstood.
Knowing what NAV really means helps you avoid a common beginner mistake. Read on for a simple breakdown built for beginners. You can explore mutual funds on Stockk.
Key Takeaways
- NAV is the per-unit price of a mutual fund.
- It equals assets minus liabilities, divided by units.
- It is calculated once daily after market close.
- A low NAV does not mean a fund is cheap or better.
- Returns depend on the growth of NAV, not its level.
How is NAV calculated?
NAV = (Total Assets minus Liabilities) / Number of Units
Imagine a fund holds investments worth ₹100 crore, owes ₹1 crore in expenses, and has 9.9 crore units. Its NAV is (100 minus 1) crore divided by 9.9 crore units, which is ₹10 per unit. You would buy or sell each unit at that ₹10 NAV.
Why does NAV update only once a day?
Unlike a stock, a mutual fund does not trade continuously. The fund values all its holdings at their closing prices after the market shuts, then computes one NAV for the day. Every investor who transacts that day gets the same NAV, based on cut-off timing rules.
The big NAV myth
Many beginners think a fund with a ₹10 NAV is cheaper or better than one with a ₹100 NAV. This is wrong. NAV is simply the current per-unit value used to track the fund; it does not reliably tell you how old a fund is, because a sharp market move can change the NAV heavily in a short time. What matters is the percentage change in NAV, not its absolute level.
| Fund | NAV | If it grows 10% |
|---|---|---|
| Fund A | ₹10 | Becomes ₹11 |
| Fund B | ₹100 | Becomes ₹110 |
Both funds gave the same 10% return. The NAV level made no difference to your gain.
How NAV affects your returns
Your return comes from the rise in NAV between when you buy and when you sell. If you invest at a NAV of ₹50 and redeem at ₹60, you have earned 20%, regardless of whether that NAV started at ₹10 or ₹100 years ago. Focus on the fund's quality and growth, not its NAV number.
If you want to act on mutual funds, Stockk lets you invest in mutual funds in one place. Set up a free account to begin, and browse the Knowledge Center to keep learning.
Mutual fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not a guarantee of future returns, and this article is for learning only, not investment advice.
Frequently Asked Questions
Does a low NAV mean a fund is cheap?
No. NAV level only reflects a fund's age and past growth, not value. A ₹10 and a ₹100 NAV fund can give identical percentage returns, so NAV is not a measure of cheapness.
When is NAV calculated?
Once each business day after markets close, when all holdings are valued at closing prices. Every investor transacting that day gets the same NAV, subject to cut-off timing.
How does NAV affect my returns?
Your return is the percentage change in NAV between buying and selling. The NAV level does not matter; only its growth does.
Why does a new fund often start at ₹10?
New funds commonly launch at a ₹10 NAV by convention. But a low NAV does not reliably tell you a fund is new or old; it only reflects the current per-unit value, so it should never be read as a sign of a cheaper or better fund.
Is a higher NAV riskier?
No, NAV level has no link to risk. Risk depends on what the fund invests in.
Investments in securities market are subject to market risks. This article is for educational purposes only and does not constitute investment advice.
INDIRA SECURITIES PRIVATE LIMITED : SEBI REG. NO.: INZ000188930, NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG.NO.: IN-DP-90-2015, CIN:U67120MP1996PTC085111, RA SEBI REG. No.: INH000023269, IA SEBI REG No.: INA000021410
