5-Minute Guide to Understanding NAV (Net Asset Value) of Mutual Funds

By Admin

• 11 Oct, 2025

📘 5-Minute Guide to Understanding NAV (Net Asset Value) of Mutual Funds

🔹 Introduction

If you’ve ever looked at a mutual fund’s details, you’ve probably seen the term NAV (Net Asset Value).
But what exactly does it mean? 🤔
Is a higher NAV better? Or should you pick a fund with a lower NAV?

In this quick 5-minute guide, let’s decode NAV in mutual funds — what it is, how it’s calculated, and how it affects your investments.

💡 What is NAV (Net Asset Value)?

NAV stands for Net Asset Value, which simply means the per-unit price of a mutual fund.

It tells you how much one unit of a mutual fund is worth on a particular day.
In other words, NAV is like the “share price” of a mutual fund.

📘 Formula:

$$\text{NAV} = \frac{\text{(Total Assets - Total Liabilities)}}{\text{Number of Units Outstanding}}$$

So, if a mutual fund owns ₹1,00,00,000 worth of assets and has 10,00,000 units,
the NAV will be:

$$₹1,00,00,000 ÷ 10,00,000 = ₹10 \text{ per unit}$$

📊 How NAV is Calculated

Every mutual fund’s NAV is updated daily based on the market value of the securities it holds.

At the end of each trading day, the fund’s assets (stocks, bonds, etc.) are valued, and any expenses or liabilities are deducted.
The resulting value is divided by the number of outstanding units to get the latest NAV.

This means:

• If the market value of the fund’s investments increases → NAV rises 📈

• If it falls → NAV decreases 📉

❓ Does a Lower NAV Mean the Fund is Cheaper?

No!
This is one of the biggest misconceptions among new investors.

A fund with a low NAV doesn’t mean it’s cheaper or will give higher returns.
NAV only shows the current value of one unit, not how good the fund is.

✅ Two funds investing in the same assets will give identical returns regardless of their NAV.

For example:

• Fund A: NAV ₹10 → grows to ₹11 → 10% return

• Fund B: NAV ₹100 → grows to ₹110 → 10% return

Same growth, same percentage — the NAV number itself doesn’t matter.

💰 When Does NAV Matter?

NAV matters when:

1. You’re buying or selling mutual fund units — it decides how many units you get.

2. You’re comparing past performance within the same fund.

3. You’re investing through Systematic Investment Plans (SIPs) — each SIP purchase happens at that day’s NAV.

🔍 NAV in Different Mutual Fund Types

• Equity Funds: NAV fluctuates daily based on stock market movements.

• Debt Funds: NAV changes with interest rate and bond value movements.

• Hybrid Funds: NAV depends on a mix of equity and debt components.

💬 Common Myths About NAV

🧠 ProShield Insight

When choosing mutual funds in 2025, don’t focus on NAV — focus on:
✅ Fund manager’s track record
✅ Past performance consistency
✅ Expense ratio
✅ Long-term risk-adjusted returns

At ProShield Invest, we help you understand not just what NAV means — but how to use it smartly for your investment goals.

🚀 Conclusion

NAV is simply the current price of a mutual fund unit, not a measure of profitability or value.
Instead of chasing low or high NAVs, invest in funds with strong fundamentals, clear objectives, and long-term potential.

📧 Email: contacts@proshieldinvest.in
📞 Phone: 011-69290568
🌐 Website: www.proshieldinvest.in
💼 Proshield Invest — Simplifying Wealth Creation for Every Indian.