What is Mutual Fund NAV?
10 May 2021

What is Mutual Fund NAV?

What does a mutual fund’s NAV or Net Asset Value mean and what goes into it? We have the answers

TLDR Points

  • The Net Asset Value (NAV) represents the price you will get for a single unit of your mutual fund scheme
  • The NAV is the total value of the scheme’s assets (minus liabilities) divided by the number of units issued
  • The NAV fluctuates based on changes in the value of the scheme’s underlying portfolio

What is a Mutual Fund's NAV?

A Mutual Fund (MF) holds a portfolio of securities in different proportions based on the fund manager’s judgment. The amount invested in these securities is collected from investors, who are issued units in return for their money.

To understand mutual fund NAV, let’s assume a mutual fund scheme has three stocks in its portfolio:

Stock A, of which it has a 1000 shares worth Rs 100 each

Stock B, of which it has 200 shares of Rs 200 each

Stock C, of which it has 800 shares of Rs 50 each.

The value of its portfolio is Rs 180,000.

Now, the mutual fund also has expenses (fund manager’s salary, administrative expenses etc.). Let’s assume, the mutual fund has expenses worth Rs 30,000.

The mutual fund has issued 15000 units of its scheme to investors.

How much is each unit worth? The calculation is simple: the value of its assets minus expenses divided by units issued – that is 180,000-30,000 / 15000. The value of each unit is Rs 10.

That is its net asset value.

Since net asset value is based on a mutual fund’s underlying portfolio, it is liable to change as the value of the portfolio changes. So, if the market does well, and prices of the stocks rise, the NAV will increase. If the market tanks and the prices of the stocks fall, the NAV will decrease.

Why is NAV important?

NAV is important because that’s the price at which you can buy or redeem mutual fund units.

Fund houses announce the mutual fund NAV every day. They have to do that because the price of the underlying securities in each portfolio changes every day. For example, if you buy an equity mutual fund that invests in stocks of mid-cap companies. Stock prices change every day, so the NAV will also fluctuate daily.

So far, we have told you about the meaning of NAV in a mutual fund. Let us now find out how relevant it is in evaluating a mutual fund for investment.

Role of NAV in a Fund’s Performance

NAV is largely used to buy or redeem units of a mutual fund. It’s never used, like a share’s price, to evaluate the investment potential of a fund. The NAV of a fund is not affected by demand and supply but is impacted by changes in the value of its underlying portfolio. Investors can use a share’s price to analyse if it’s under- or over-valued, but not so in the case of mutual fund NAV.

MF NAV, however, allows investors to track the performance of a fund over time by looking at changes in the NAV. If a mutual fund with an NAV of Rs 10 moves to Rs 12 in a year that means it has delivered a return of 20%.

Factors that affect mutual fund NAV

We have already talked about how changes in the underlying portfolio will affect a fund’s NAV. Another factor that will impact NAV is the expense ratio. Higher expenses will bring down the NAV; lower expenses will improve NAV. Also, in dividend payout options, the NAV of a mutual fund will reduce to the extent of the dividend payout.


Knowing what is NAV is important to calculate how many units of a fund, you will be allotted for a fixed amount of money. Do remember, however, that a low NAV does not necessarily mean a good fund and neither does a high NAV mean an expensive scheme. When you are evaluating a mutual fund, consider whether it fits your long-term goals and risk appetite.

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Read up more on Mutual Funds here.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.