What is NAV in mutual funds? Meaning and how it is calculated
NAV (Net Asset Value) is the price of one unit of a mutual fund scheme. It is calculated by taking the total value of the scheme assets, subtracting its liabilities and expenses, and dividing the result by the number of units outstanding.
Updated: · For education only. Not investment advice.
The NAV formula
NAV = (Total value of assets − Liabilities and expenses) ÷ Number of units outstanding. Fund houses calculate it at the end of every business day using the closing prices of the securities the scheme holds, and publish it on their websites and on the AMFI website.
An example (hypothetical numbers)
Suppose a scheme holds assets worth ₹1,010 crore, has liabilities and expenses of ₹10 crore, and has 20 crore units outstanding. NAV = (1,010 − 10) ÷ 20 = ₹50 per unit. If you invest ₹10,000 at this NAV, you get 200 units. These numbers are only for explanation.
How NAV affects you
When you buy, your money is converted into units at the applicable NAV. When you redeem, your units are sold at the applicable NAV. Which day NAV applies depends on the cut-off time of the scheme, so a request made late in the day may get the next business day NAV. Check the scheme documents for the exact rule.
NAV and returns
If a scheme NAV goes from ₹50 to ₹60, the value of one unit has risen by 20 percent. The NAV level itself does not tell you whether a fund is good or cheap. A fund with an NAV of ₹10 is not cheaper than a fund with an NAV of ₹500, because returns depend on the percentage change, not on the price per unit.
Common misunderstandings
- A low NAV means the fund is cheap and will give higher returns. It does not. What matters is the percentage change and the scheme quality, risk and costs.
- NAV is a stock market price. For regular open-ended schemes, NAV is the price at which you transact with the fund house, not a price set by buyers and sellers on an exchange.
- A falling NAV means the fund is bad. NAV moves every day with markets. Whether you gain or lose depends on the NAV you bought at, the NAV you sell at, and the scheme objective and risk.
Keep learning
Frequently asked questions
Where can I check the NAV of a mutual fund?
You can check it on the fund house website, on the AMFI website, which publishes scheme NAVs, or in your fund statement and app.
How often is NAV declared?
For most mutual fund schemes the NAV is declared every business day, after the markets close. Some schemes may follow a different timing, so check the scheme documents.
Does NAV include expenses?
Yes. Scheme expenses, shown as the expense ratio, are deducted from the scheme assets daily, so they are already reflected in the NAV.
Sources and further reading
Mutual fund investments are subject to market risks. Read all scheme related documents carefully.