15 Things You Need to Know About Mutual Fund NAV

15 Things You Need to Know About Mutual Fund NAV

People always look at prices before they purchase a product. This is a basic human tendency. No matter the item, they would look at the price and check if there is a cheaper version elsewhere before deciding to buy. This is one criterion people use to decide whether the item is worth it. 

This idea of checking prices and comparing them is also extended to investment choices. When you are preparing to purchase equity, the first thing to check is its stock prices. That will tell you whether it is affordable, and you can decide accordingly. In the case of mutual funds, the price to check would be the Net Asset Value or the NAV, as it is popularly called. 

However, does NAV mean the same as stock price? What is NAV meaning in a mutual fund? How does a mutual fund NAV affect your investment decision? These are all questions you will need the answer to before deciding on your mutual fund purchase. Here's a list of 15 things you need to know about mutual fund NAV.

What Is Mutual Fund NAV? 

The NAV's full form in a mutual fund is Net Asset Value, the price of one unit of a mutual fund. That is, it is the per-share market value of a mutual fund.

Remember, mutual funds pool money from different investors to buy stocks, bonds, equities, and other investment vehicles to build a portfolio. Then, this portfolio containing various investment assets is divided into units of a mutual fund. The NAV is the cost of each of these units. Thus, a mutual fund NAV represents all assets a mutual fund holds.

How Is Mutual Fund NAV Calculated?

The NAV of a mutual fund is calculated using the following formula:

(Value of all securities held + value of all receivables - value of all payables) / Number of units

Thus, it is calculated as the net current value of total assets in a mutual fund minus the total value of all liabilities (if any), divided by the total number of outstanding units in the fund. 

For example, let's consider a mutual fund called MF-A, in which the value of all securities equals INR 1000, the value of all receivables equals INR 100, and the value of all payables is INR 50, while the number of outstanding units is 100. The NAV of MF-A will be:

(1000 + 100 - 50) / 100 = 1050 / 100 = INR 10.50. 

Why Does The Mutual Fund NAV Fluctuate?

The mutual fund NAV fluctuates because the price of the underlying securities in the fund portfolio changes daily.

A mutual fund usually holds many different securities and debt instruments in its portfolio, and their value varies as they are traded on various stock exchanges. These changes in the price of these assets directly affect the NAV of the mutual fund. 

How Relevant Is The Mutual Fund NAV For Investors?

The answer to this question is not very. As an investor, the NAV will merely tell you how many units you will be allocated based on the amount you invested. As an investor, this is not something you need to worry about. 

Instead, you should consider how much the fund you invested in has appreciated; i.e., the returns your fund is pulling in. The appreciation of a NAV scheme is more important to the investor than the NAV itself. 

How Is A Mutual Fund's NAV Different From the Share Price?

Though NAV and share price seem similar, they are not the same. The following table illustrates the differences between the two:

NAV Share Price
The NAV is calculated based on the value of securities.  The share price varies based on investor perceptions and the company's functioning.
The NAV is the cost of one unit of a mutual fund, which holds many assets and securities. A stock price reflects the intrinsic value of the company. 
Mutual Fund investors are given units of a mutual fund. Equity investors are given a stake in the company in the form of shares.
The demand for a mutual fund doesn't alter the mutual fund's NAV. Share prices are influenced heavily by the market forces of demand and supply.
The NAV is calculated only after the close of market hours. Stock prices keep changing even during market hours.
Units of a mutual fund are allocated in values with up to three decimal places, and the NAV amount can come up to four decimal places.  Stocks and shares are not available in fractions, and share prices can only be valued with up to two decimal places. 

How Is The NAV Important To The Performance Of A Mutual Fund?

The mutual fund NAV is not an indicator of the fund's performance. This is because the NAV is based only on the values of the securities owned by the mutual fund. This means that two mutual funds with the same portfolio could have different NAVs. One may have a NAV of INR 10, while the other has a NAV of INR 100. 

As a mindful investor, you would need to look at factors such as the mutual fund's total expense ratio, historical value, etc., to make a wise investment choice.

What Is The Difference Between NAV and AUM?

The NAV is not very relevant to you as an investor, but the AUM or the Asset Under Management is very important.

The AUM is the total assets being controlled by the mutual fund. Usually, this includes all the assets invested by the mutual fund and all the cash it holds. 

Why Is The NAV Declared Daily?

The mutual fund NAV today will be different from the mutual fund NAV the day before because the NAV is declared daily. This is to ensure that new investors who enter the scheme aren't unduly benefitted, nor are they at a loss, as the market value of investments is captured. Thus, doing this creates an even playing field for both old and new investors. 

Which NAV Value Is Considered When Purchasing Or Selling Mutual Fund Units In The Evening?

If you purchase or sell mutual fund units before 3 PM on a working day, the NAV value will be the same as the latest NAV of mutual funds or the NAV of the day of purchase or sale.

However, if you decide to purchase or sell mutual fund units after 3 PM, the NAV value will be the NAV calculated for the next day. Additionally, if the purchase or sale happens on holiday, the NAV value will be the NAV of the next working day. 

When Is The NAV Updated?

The NAV is updated at the end of each working day. The Securities and Exchange Board of India, or SEBI, mandates that the latest NAV of mutual funds is calculated and updated by 9 PM daily. Mutual funds must also update the AUM before 9 PM.

The NAV is not updated live because constantly tracking the value of different assets held by a mutual fund can be complicated.

How Do Sensex And Nifty Affect The Mutual Fund NAV Value?

This depends on the type and quantity of assets the mutual fund holds. A large-cap mutual fund that invests in the largest companies would most definitely be affected by changes in Sensex and Nifty. Multi-cap funds that invest in companies of different sizes could also be affected by alterations in Sensex and Nifty. 

Moreover, since the performance of large-cap funds often affects those of small-cap and mid-cap funds, the latter two could also be affected by changes in Sensex and Nifty. 

What Is The NAV Value Of An SIP?

A SIP or Systematic Investment Plan does not affect the value of a mutual fund NAV, as SIPs and lumpsum payments are just payment methods for the mutual fund itself. Since how you pay for the fund does not affect the characteristics of the fund itself, it does not affect the NAV value either.

Can The Value Of A Mutual Fund NAV Drop Like Those Of Stocks? 

Yes, the NAV of a mutual fund can drop based on the assets held by the fund. Since the value of the assets changes from time to time, the NAV will also change accordingly. Thus, if the value of the assets were to drop, so would the NAV. 

Why Is NAV Important?

The NAV is important because it determines the value at which you would enter the scheme and the value you would receive if you redeem it. Additionally, the mutual fund NAV history, or the changes in the NAV value over time of a particular fund, helps track the fund's performance to see how well it has done against its peers and the benchmark.

Is A Low NAV Better?

A lower NAV is not necessarily better, as it doesn't mean that the mutual fund is cheaper. A low NAV indicates only the age of a mutual fund. The higher NAV, the older the fund. 


To conclude, a mutual fund NAV is not a tool to compare the performance of different mutual funds. The only thing it indicates is the age of the fund and the cost of a mutual fund unit. 

Frequently Asked Questions

What is the NAV full form in a mutual fund?

The full form of NAV in relation to mutual funds is Net Asset Value, which is the cost of one unit of a mutual fund. 

What is the formula to calculate the NAV of a mutual fund?

The formula to calculate the NAV of a mutual fund is as follows:

(Value of all securities held + value of all receivables - value of all payables) / Number of units

Is the NAV of a mutual fund important to the investor?

The NAV of a mutual fund is not important to the investor, as it is simply the cost of each unit of a mutual fund and doesn't help you compare mutual funds. However, it shows the fund's age and can be used to track the fund's performance over time.