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What is Mutual Fund NAV ?

Updated: Sep 5

What is Mutual Fund NAV

NAV means net asset value. It is the value of each mutual fund unit. NAV is calculated by dividing sum of all investment and cash holding of mutual fund by total unit issued to investors.

NAV of mutual fund is similar to stock price it increases or decreases based on market  value of investment made by the mutual fund scheme. In case you have selected dividend option of mutual fund scheme then mutual fund NAV will decrease whenever fund declares dividend.

NAV of all mutual funds is declared on all business days on or before 9:00 PM.

Initially NAV of mutual fund unit is Rs 10 when mutual fund is launched. As the value of investment increases, NAV of each unit also increases.

No of unit allocated= Amount invested/NAV

Example if you invest 1000 rupees at NAV of 20 Rs, you will be allocated 50 units.

Does NAV of mutual fund really matter ?

NAV of mutual fund is not like stock price, that mutual fund with NAV of Rs 10 is cheaper then NAV of Rs 100.

Suppose you invest 1000 rupees in one mutual fund with NAV Rs 10 and your friend invests in mutual fund with NAV Rs 100. You will get 100 units and your friend will get 10 units.

If both funds give return of 10 % so fund NAV will become Rs 11 while your friends mutual fund NAV will become 110.

Value of your investment= 100 units x 11= 1100

Value of your friends investment=10 units x 110= 1100

You can see that both of you have made same gain irrespective of NAV of mutual fund and no of units. Thus fund performance matters and not NAV of mutual fund.