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Mutual Fund Basics · Beginner · 5 min read

What Is NAV in a Mutual Fund?

The short answer

NAV, or Net Asset Value, is the per-unit value of a mutual fund scheme: the market value of everything the scheme holds, minus its liabilities, divided by the number of units outstanding. It is normally declared once at the end of each business day, not continuously like a share price. A scheme with a NAV of ₹12 is not cheaper than one with a NAV of ₹600 — the NAV number tells you nothing on its own about value, quality or future return.

Written and reviewed by Amit Chadha, Mutual Fund Distributor at MutualFundAdvisor.in · AMFI ARN: 349461. Last reviewed .
This article is investor education only. It is not investment advice, a scheme recommendation or an assurance of returns.

NAV is the single most misunderstood number in mutual fund investing. Because it looks like a price, people instinctively treat it like one — hunting for a "low NAV" fund the way they would hunt for a cheap share.

That instinct is wrong, and the reason it is wrong is worth understanding properly, because it protects you from a whole family of bad decisions.

What NAV actually measures

A scheme holds a portfolio of securities. Add up the market value of everything it holds, add any cash and receivables, subtract the scheme's liabilities and accrued expenses, and you have the net assets. Divide that by the number of units outstanding and you have the Net Asset Value per unit.

So NAV is an output, not an input. It is the arithmetic result of the portfolio's value at the close of a day, spread across however many units exist.

Why a low NAV does not mean a cheap fund

Imagine two schemes holding exactly the same portfolio in exactly the same proportions. One launched in 2005 and its NAV has grown to ₹600. The other launched last month at the standard ₹10 and is now at ₹10.40. Which is cheaper?

Neither. If both portfolios rise 10%, both NAVs rise 10%, and both investors gain 10%. Investing ₹10,000 in the first buys fewer units at a higher NAV; investing ₹10,000 in the second buys more units at a lower NAV. The rupee value of your holding is identical, and so is your return.

The NAV number reflects how long the scheme has existed and what has happened since — not how attractively it is priced today. A share price can be compared to earnings or book value to say something about valuation. A NAV cannot, because a mutual fund's units are always created and redeemed at the value of the underlying portfolio.

When NAV is declared

Open-ended schemes generally declare NAV at the end of each business day, after the markets close and the portfolio can be valued. This is different from a share, which has a live price all through the trading session, and different from an ETF, whose units trade on an exchange at a market price that can differ slightly from its underlying NAV.

Because NAV is a once-a-day figure, you cannot time a mutual fund purchase within the day. You do not know the NAV you will get at the moment you place the transaction.

Which NAV applies to your transaction

The NAV you receive depends on the applicable NAV rules set by SEBI, which turn on when your application is received and — importantly — when the money is actually realised by the scheme, not merely when you clicked confirm.

The practical consequence is that a transaction placed late in the day, or one where funds clear the next day, may be processed at a different day's NAV than you assumed. The exact cut-offs and realisation rules are published by the AMC and the RTA; check the current ones rather than relying on how it worked some years ago.

What NAV does not tell you

NAV does not tell you whether a scheme is well managed, whether its risk suits you, what it costs to own, or what it will do next. Those answers live in the scheme's mandate, portfolio, risk disclosures and expense ratio.

The one genuinely useful thing NAV does is let you track your own holding: units multiplied by NAV is the current value of your investment, and the change in NAV over your holding period is the source of your gain or loss.

Key takeaways

  • NAV = (market value of holdings + receivables − liabilities) ÷ units outstanding.
  • It is normally declared once per business day, after markets close.
  • A low NAV does not make a scheme cheap; an identical portfolio delivers an identical percentage return at any NAV.
  • Expenses are already deducted before NAV is struck, so the NAV you see is net of them.
  • Which day's NAV applies depends on SEBI's applicable-NAV rules, including when funds are realised.

Put this to work on your own numbers

  • Lumpsum Calculator

    See how a one-time investment's value changes with an assumed rate of growth.

  • XIRR Calculator

    Turn your actual dated transactions into a single annualised return figure.

Frequently asked questions

Sources and editorial review

Checked against the primary sources below on . Scheme terms, tax rules and regulatory requirements change — confirm the current position before acting on anything here.

What to read next

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Want to talk this through with a person?

Amit Chadha is a Mutual Fund Distributor (ARN: 349461). The first conversation is free and educational.

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