What is NAV of mutual funds?

by Kanika Shelatkar Insurance Consultant

Mutual funds are investment schemes which invest in a portfolio of securities. Mutual funds are managed by asset management companies, where fund managers are responsible for the performance of different schemes. Units of mutual fund schemes can be bought or sold on the basis of prevailing Net Asset Value or NAV. In this article we will discuss about NAV mutual funds.

Expense Ratio

Before we discuss about NAV, we should understand one important aspect of mutual funds, expense ratio. For the services the AMCs provide like distribution, fund management, administration etc, they incur expenses and charge a fee to the unit holders to defray the expenses. The scheme expenses are charged proportionately against the assets of the fund and are adjusted in the NAV or price of the unit. TER or total expense ratio is the expenses of a mutual fund scheme as a percentage of the scheme assets under management (AUM).

Net Asset Value

The NAV is calculated by dividing the net assets of the scheme by the total number of units outstanding. The asset of a scheme is the market value of the securities and the cash in the scheme portfolio. Net asset is the value of scheme assets minus the TER and liabilities. Mutual fund units are purchased or redeemed on the basis of NAVs of the schemes. In simplistic terms, NAV is the price of a mutual fund unit.


When you redeem units of your mutual fund scheme, your redemption proceeds will be equal to the number of units redeemed multiplied by the scheme NAV on the day of redemption. However, if you redeem within the exit load period (as specified in the scheme information document), the exit load will be deducted from your redemption proceeds based on the exit load structure of the scheme (as specified in the SID)

Things you should know about NAV

At the time of New Fund Offer (NFO), NAV mutual funds are priced at par value. Par value is usually Rs 10.

After the NFO, NAVs will change depending on the market movements. If the prices of the securities in the fund portfolio increase, NAV will rise and vice versa.

High or low NAV does not indicate value of a mutual fund scheme, i.e. high NAV does not mean that a fund is expensive and a low NAV does not mean a fund is cheap. Even a NAV of Rs 10 or lower, does not imply that you are investing in a scheme at an attractive price.

High or low NAV is not an indicator of fund performance, i.e. a scheme with a high NAV is not necessarily a good performer and vice versa.

The percentage change in NAVs of a scheme over a period of time expressed in compounded annual growth rate (CAGR) is a measure of the scheme’s performance. Absolute NAVs are irrelevant as far as performance is concerned.

If you are investing through SIP investment, you buy units of your scheme at different prices based on prevailing NAVs on the SIP instalment dates. Since NAVs of a scheme can move up or down depending on market conditions, you can take advantage of market volatility through Rupee Cost Averaging. SIP investment helps you accumulate units at different price points and thus benefit from rupee cost averaging.

You will find NAV of different mutual fund schemes on the AMC websites. You can also check the website of AMFI India to see the NAV mutual funds. 

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About Kanika Shelatkar Innovator   Insurance Consultant

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Joined APSense since, March 18th, 2019, From mumbai, India.

Created on Jan 6th 2022 02:05. Viewed 222 times.


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