What is NAV in Mutual Funds? Net Asset Value Explained Simply

NAV — Net Asset Value — is the price at which you buy or sell mutual fund units. It's calculated daily and published at the end of each trading day. Understanding NAV clears up some of the most persistent myths about mutual fund investing.

How NAV Is Calculated

NAV = (Total Assets of Fund − Liabilities) / Number of Outstanding Units

Total assets include the market value of all securities held in the fund, plus any cash. Liabilities include management fees, operational expenses, and any outstanding payables. This is recalculated at end of every market trading day.

The Biggest NAV Myth: Low NAV ≠ Cheap

Many investors believe a fund with NAV of ₹10 is cheaper or better than one with NAV of ₹500. This is a misconception. NAV reflects accumulated growth — a ₹500 NAV fund has grown more since inception. What matters is the future return percentage, not the absolute NAV level.

NAV and Your Returns

If you invest ₹10,000 in a fund at NAV ₹50, you get 200 units. If NAV grows to ₹75 (50% growth), your investment is worth ₹15,000 — a 50% return. Same percentage return would apply if NAV was ₹10 and grew to ₹15. The starting NAV level is irrelevant to your return percentage.

When Does the NAV Apply to Your Order?

• Orders placed before 3:00 PM on a trading day: Same-day NAV
• Orders placed after 3:00 PM: Next trading day's NAV
• Liquid funds: NAV of the day before (because of T+1 settlement)

IDCW vs Growth NAV

Growth NAV reinvests all profits — the NAV grows over time. IDCW (formerly Dividend) NAV periodically distributes profits as dividends, which are taxable. For long-term wealth creation, Growth option is almost always better due to compounding and tax efficiency.