If you invest in mutual funds, you see the term NAV everywhere — on your investment app, in fund factsheets, and in financial news. But what exactly is NAV, and how is it calculated?

This guide explains NAV in simple terms, with examples.

What is NAV?

NAV stands for Net Asset Value. It is the price of one unit of a mutual fund scheme.

When you invest in a mutual fund, your money buys units of that fund. The NAV tells you what each unit is worth at any given point in time.

For example:

• If a fund’s NAV is ₹50 and you invest ₹10,000, you get 200 units (₹10,000 ÷ ₹50)
• If the NAV rises to ₹55, your 200 units are now worth ₹11,000 (200 × ₹55)
• If the NAV drops to ₹45, your 200 units are worth ₹9,000 (200 × ₹45)

NAV is calculated once every business day, after the stock market closes. Unlike share prices, which change every second during trading hours, a mutual fund’s NAV changes only once a day.

How is NAV Calculated?

The formula is:

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

Let us break this down:

Total Assets

This is the total value of everything the mutual fund owns:

• Stocks — Valued at the closing market price for the day
• Bonds and debentures — Valued at the current market value or amortised cost
• Cash and bank deposits — At face value
• Accrued interest — Interest earned but not yet received on bonds and deposits
• Dividends receivable — Dividends announced by companies but not yet paid

Total Liabilities

This is what the mutual fund owes:

• Management fees — Fees payable to the AMC
• Operating expenses — Custodian fees, audit fees, registrar fees, marketing costs
• Pending redemptions — Money owed to investors who have requested redemption
• Other payables — Any other obligations

Total Number of Units Outstanding

This is the total number of units currently held by all investors in the fund. This number changes as new investors buy units (new units are created) and existing investors redeem (units are cancelled).

A Simple Example

Suppose a mutual fund has:

• Stocks worth ₹500 crore
• Bonds worth ₹200 crore
• Cash of ₹30 crore
• Accrued interest of ₹5 crore
• Total Assets = ₹735 crore

And:

• Management fees payable: ₹2 crore
• Other expenses payable: ₹3 crore
• Total Liabilities = ₹5 crore

And:

• Total units outstanding = 50 crore units

Then:

NAV = (₹735 crore − ₹5 crore) ÷ 50 crore = ₹730 crore ÷ 50 crore = ₹14.60

Each unit of this fund is worth ₹14.60.

When is NAV Calculated?

NAV is calculated at the end of every business day by the fund’s AMC (Asset Management Company).

The timeline:

1. 3:30 PM — Stock market closes
2. After market close — The AMC calculates the closing value of all securities in the portfolio
3. By evening/night — The NAV is computed and published
4. Available next morning — You can see the updated NAV on the AMC website, AMFI website, or your investment platform

On weekends and market holidays, no new NAV is calculated. The last available NAV remains in effect until the next business day.

Does a Lower NAV Mean a Better Fund?

No. This is one of the most common misconceptions in mutual fund investing.

A fund with NAV of ₹15 is not “cheaper” or “better” than a fund with NAV of ₹500. NAV is simply a function of how long the fund has been running and how well it has performed.

Here is why:

Fund A: Started 2 years ago, NAV = ₹15 Fund B: Started 20 years ago, NAV = ₹500

If both funds earn 12% return next year:

• Fund A: NAV goes from ₹15 to ₹16.80 (12% growth)
• Fund B: NAV goes from ₹500 to ₹560 (12% growth)

Your percentage return is the same regardless of the NAV. If you invested ₹1 lakh in either fund, you would have ₹1,12,000 after one year.

The absolute NAV number does not matter. What matters is the rate of growth (return percentage).

NAV and Your Transactions

Buying Units

When you invest in a mutual fund, you get units at the applicable NAV for that day:

• Equity funds: If you invest before 3:00 PM on a business day, you get that day’s NAV. After 3:00 PM, you get the next business day’s NAV.
• Debt funds: Similar cut-off times apply (varies by fund type and amount).

Selling (Redeeming) Units

When you redeem, your units are sold at the applicable NAV:

• The same cut-off times apply
• If exit load is applicable, it is deducted from the NAV to give you the redemption price

SIP Investments

Each SIP instalment buys units at the NAV on the SIP date. If the NAV is high, you get fewer units. If the NAV is low, you get more units. Over time, this averages out — this is the principle of rupee cost averaging.

NAV vs Share Price

People sometimes confuse mutual fund NAV with stock prices. Here are the key differences:

How Does the Expense Ratio Affect NAV?

The expense ratio is deducted from the NAV daily. If a fund earns 0.05% on a particular day but has a daily expense of 0.004% (roughly 1.5% annually ÷ 365 days), the NAV increases by only 0.046%.

This is why you never see a separate “fee deducted” line in your mutual fund statement. The fee is already baked into the NAV. When you see the NAV go up by 10% over a year, that is your net return after all expenses have been deducted.

Key Takeaways

• NAV is the price of one unit of a mutual fund, calculated daily after market close
• It is calculated as: (Total Assets − Total Liabilities) ÷ Total Units Outstanding
• A lower NAV does not mean a better or cheaper fund — what matters is the return percentage
• NAV is calculated once a day, unlike stock prices which change in real-time
• The expense ratio is deducted from NAV daily, so the NAV you see is already net of fees
• Your investment value = Number of units you hold × Current NAV

NAV is a fundamental concept in mutual fund investing. Once you understand that it is simply the per-unit value of the fund’s portfolio, everything else — returns, expenses, SIP calculations — becomes much clearer.