What Is NAV in Mutual Funds? Everything You Need to Know

If you have ever looked at a mutual fund, you would have seen a number called NAV. It is one of the most fundamental concepts in mutual fund investing, yet many investors do not fully understand it. Let us break it down.

What Is NAV?

NAV stands for Net Asset Value. It represents the per-unit price of a mutual fund scheme. Think of it as the “price” of one unit of the fund.

Formula: NAV = (Total Assets – Total Liabilities) / Total Number of Units

For example, if a mutual fund has total assets worth ₹100 crore, liabilities of ₹1 crore, and 10 crore units outstanding, the NAV would be: (100 – 1) / 10 = ₹9.90 per unit.

How Is NAV Calculated?

Mutual fund companies (called AMCs — Asset Management Companies) calculate NAV at the end of every business day. Here is what goes into it:

• Market value of all stocks, bonds, and other securities the fund holds
• Plus: Any dividends or interest received
• Minus: Fund expenses (management fees, operating costs)
• Divided by: Total number of units held by all investors

When you place a buy or sell order for a mutual fund, you get the NAV of that day (if ordered before the cut-off time, usually 3:00 PM for equity funds).

Does a Lower NAV Mean a Better Fund?

This is one of the biggest misconceptions in mutual fund investing. No, a lower NAV does not mean the fund is cheaper or better.

Here is why: Suppose Fund A has a NAV of ₹10 and Fund B has a NAV of ₹100. If you invest ₹10,000:

• Fund A: You get 1,000 units
• Fund B: You get 100 units

If both funds grow by 10%, your investment in both becomes ₹11,000. The number of units does not matter — what matters is the percentage return.

A fund with NAV of ₹500 that has been around for 20 years may be a much better performer than a new fund with NAV of ₹10.

NAV and Your SIP

When you invest through a SIP, you buy units at different NAVs each month. In months when the NAV is lower (market is down), your SIP buys more units. When NAV is higher, it buys fewer units. This is rupee cost averaging in action.

Example:

• Month 1: NAV ₹50, SIP ₹5,000 → 100 units
• Month 2: NAV ₹40, SIP ₹5,000 → 125 units
• Month 3: NAV ₹60, SIP ₹5,000 → 83.33 units

Total invested: ₹15,000. Total units: 308.33. Average cost per unit: ₹48.65 (lower than the simple average NAV of ₹50).

When Is NAV Important?

• Buying units: Your purchase price is based on the day’s NAV
• Selling units: Your redemption value is NAV × number of units
• Tracking performance: NAV growth over time shows how well the fund has performed

NAV Cut-Off Times

SEBI has set specific cut-off times for mutual fund transactions:

• Equity and hybrid funds: Orders before 3:00 PM get the same day’s NAV
• Debt funds: Orders before 3:00 PM with same-day fund realization get that day’s NAV
• Orders after cut-off: Get the next business day’s NAV

Track Your NAV with Bachatt

The Bachatt app shows you real-time NAV for all your mutual fund holdings. You can see how many units you own, at what average NAV you bought them, and your current returns — all in a simple, clean dashboard.