Understanding NAV: What Mutual Fund Investors Should Know

arbabbio1
May 19
2 min read

Updated: May 20

When you start investing in mutual funds, one of the first terms you’ll come across is NAV. Don’t worry — it’s not as complicated as it sounds. Let’s break it down in simple words.

What is NAV?

NAV stands for Net Asset Value. It is the price of one unit of a mutual fund.

Think of it like the price tag on a product. Just like you pay ₹50 for a soap, you pay the NAV to buy one unit of a mutual fund.

How is NAV Calculated?

The formula is simple:

NAV = (Total Value of All Investments – Expenses) / Number of Units

Let’s say a mutual fund has ₹10 crore worth of stocks and bonds, and some small expenses. If the fund has 1 crore units, then:

NAV = ₹10 crore / 1 crore = ₹10 per unit

So, if you invest ₹1,000, you’ll get 100 units of the fund.

Is a Lower NAV Better Than a Higher NAV?

Not really. This is a common misunderstanding.

A fund with ₹10 NAV and another with ₹100 NAV can give the same returns. What matters is how much the value grows, not the starting NAV.

Let’s say:

Fund A (NAV ₹10) grows to ₹11 → You earn 10%
Fund B (NAV ₹100) grows to ₹110 → You also earn 10%

So, the growth percentage is important — not just the NAV.

When is NAV Important?

NAV is important for two things:

Buying and Selling Mutual Fund Units When you invest in a mutual fund (like a SIP), you buy units at the NAV of that day.
Tracking Your Investment If NAV increases, your investment grows. If it goes down, your investment value reduces.

Does NAV Change Daily?

Yes, for most mutual funds, NAV is updated every business day. It reflects the value of the fund’s holdings at the end of the market day.

Key Takeaways

NAV is just the per-unit price of a mutual fund.
A lower NAV doesn't mean the fund is cheaper or better.
What matters is the performance of the fund over time.
You earn returns based on how much the NAV grows after you invest.

Final Thoughts

Don’t get confused by NAV. Focus on choosing the right mutual fund, one that suits your goal, risk level, and investment time frame. NAV is just one small part of the whole picture.

If you still have questions, feel free to reach out. I’m always happy to help you invest with confidence — even if you’re starting with just ₹1000 per month.