NAV - Net Asset Value
Understanding mutual fund pricing, NAV calculation, and why a lower NAV does not mean a cheaper fund.
What is NAV?
Net Asset Value (NAV) represents the per-unit market value of a mutual fund. It is the price at which investors buy (subscribe) or sell (redeem) fund units. When a mutual fund launches through an NFO, units are conventionally issued at a baseline par value of ₹10. Post-NFO, the NAV becomes dynamic, reflecting the daily market valuation of the fund's underlying portfolio.
NAV Calculation Formula
NAV = (Total Market Value of Assets - Total Liabilities) / Total Number of Outstanding Units
Assets include: Equities, bonds, cash equivalents, receivables
Liabilities include: Operational expenses, management fees, accrued costs
NAV Declaration
- • NAV is calculated at the end of every trading day
- • Published by 9 PM on the same day (T)
- • Applicable for transactions before cut-off times:
- - Equity funds: 3:00 PM
- - Liquid funds: 1:30 PM
- • Same-day NAV for applications before cut-off
Common Misconception: Lower NAV ≠ Cheaper
Critical Understanding
A lower NAV does not inherently indicate a cheaper or superior fund. NAV simply represents the current unit price. Performance must be evaluated based on the percentage growth of the NAV over time relative to peer funds. A fund with NAV ₹100 growing 10% delivers the same return as a fund with NAV ₹10 growing 10% - both give 10% returns on invested capital.
NAV vs Fund Performance
| Fund | Initial NAV | Current NAV | Return |
|---|---|---|---|
| Fund A | ₹10 | ₹20 | 100% |
| Fund B | ₹100 | ₹200 | 100% |
Both funds delivered identical 100% returns - NAV value does not indicate performance.
Types of NAV
Regular Plan NAV
Includes distributor commission, resulting in slightly lower NAV compared to direct plans.
Direct Plan NAV
Higher NAV as no distributor commission is deducted, leading to better long-term returns.