What is NAV?
NAV (Net Asset Value) is simply the price of one unit of a mutual fund. Just like a share price tells you what one share costs, NAV tells you what one unit of a mutual fund costs.
NAV is calculated every business day after market close:
NAV = (Total Assets - Liabilities) ÷ Total Number of Units Outstanding
If a fund has ₹1,000 crore in assets, ₹5 crore in liabilities, and 10 crore units outstanding: NAV = (1000 - 5) ÷ 10 = ₹99.5 per unit.
How NAV Moves
NAV increases when the underlying portfolio (stocks or bonds) increases in value. NAV decreases when portfolio value falls.
- If all stocks in a fund rise 2% today → NAV rises approximately 2%
- If stocks fall 3% → NAV falls approximately 3%
- Dividends paid by companies enter the fund and increase NAV
- Fund expenses are deducted from NAV daily (this is how expense ratio works)
The Single Biggest Myth: High NAV = Expensive Fund
This is perhaps the most persistent and damaging mutual fund myth in India. Many investors prefer funds with ₹10 NAV over funds with ₹500 NAV thinking the ₹10 fund is "cheaper" and has more room to grow.
This is completely wrong. Here's the mathematical proof:
Fund A: NAV = ₹10. You invest ₹10,000 → you get 1,000 units.
Fund B: NAV = ₹500. You invest ₹10,000 → you get 20 units.
Both funds invest identically and grow 20% in a year:
- Fund A: New NAV = ₹12. Your 1,000 units = ₹12,000. Gain: ₹2,000 (20%)
- Fund B: New NAV = ₹600. Your 20 units = ₹12,000. Gain: ₹2,000 (20%)
Identical outcome. The number of units is irrelevant. What matters is the percentage return, not the NAV level.
Why Some Funds Have High NAVs
A high NAV simply means the fund has been around longer and has compounded returns for many years. A fund started in 2003 with ₹10 NAV that has consistently delivered 15% p.a. would have a NAV of ~₹580 today. That's not "expensive" — that's the track record you should want.
Conversely, a new fund at ₹10 has no track record. The low NAV is not an opportunity — it's just a starting point.
When Does NAV Actually Matter?
NAV matters in one specific context: the ex-dividend NAV drop. When a mutual fund declares a dividend (IDCW), the NAV falls by exactly the dividend amount on the ex-dividend date. Many investors mistakenly buy just after this NAV fall thinking the fund is "cheap" — but they're buying at a fair price; the dividend was the fund's own money returned to investors.
What You Should Actually Compare Instead of NAV
| Don't Compare | Do Compare |
|---|---|
| NAV level (₹10 vs ₹500) | Percentage return vs benchmark over 5–10 years |
| Number of units received | Expense ratio (lower is better) |
| Fund that "looks cheaper" | Fund's alpha vs category average |
| NAV growth rate | Risk-adjusted returns (Sharpe ratio, Sortino ratio) |
How to Track Your NAV and Returns
- AMC websites: Published every business day by 9 PM
- AMFI website (amfiindia.com): Official NAV for all mutual funds
- Value Research Online: Historical NAV, returns comparison, portfolio analysis
- CAS (Consolidated Account Statement): CAMS or KFintech send monthly statements showing NAV, units, and current value
The bottom line: never use NAV level to compare or choose funds. Use long-term returns, expense ratio, and consistency. Our AMFI-registered MFD can help you evaluate funds correctly — book a free consultation today.