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What is Net Asset Value NAV? Is it important to monitor NAV?

Written by - Akshatha Sajumon

January 12, 2022 6 minutes

Investment in mutual funds has become hugely popular over the last decade. There are many SIPs opened in each month to the turn of crores of rupees due to increased investor awareness and market conditions. While investing in mutual funds one of the crucial factors to be looked for is the NAV of the fund. 

Given below are a few details regarding the NAV of the mutual funds and it’s importance for the investors.

What is NAV?

NAV or the net assets value of the mutual funds is the per unit market value of the assets or securities held by the fund. It is often loosely taken as the measure of the performance of the fund though it is not to be considered to be the only factor while making an investment decision. The NAV of the fund typically starts from Rs. 10 per unit and gradually rises when the fund performs better and the assets of the fund grow over a period of time. 

How is daily NAV for a mutual fund calculated?

The mathematical formula for calculating NAV requires considering all the expenses as well as the external liabilities of the fund and the total assets of the fund.  The formula for calculating the NAV or the per unit value of the mutual fund is mentioned below.

NAV = (Total Assets of the fund – Total Liabilities of the fund) / Total number of outstanding units of the fund

The investor will get the units of the mutual fund allotted to them on the same day’s NAV if the amount is credited to the mutual fund’s bank account before 3pm (cut-off time for current day NAV to be applicable). In other cases, the units will be allotted on the NAV of the day the funds are realized in the mutual fund’s bank account. 

It is to be noted that a lower NAV does not necessarily mean that the fund is cheaper and that an investment in the fund can be profitable by purchasing the units at lower NAV. It is therefore not considered as a single point of reference while making an investment decision. 

Difference between NAV and market price of a share

The NAV of the fund is different from the market price of any share. Investors purchase the share at their market price while mutual fund units are purchased at book value. While the market price of the share is heavily dependent on the demand and supply forces and future prospects of such shares in the market, NAV is not determined on such a basis. 

NAV of the fund is decided by the AMC at the end of the day after taking into account the closing prices of the underlying securities (equity or the debt instruments) that form part of the fund. 

Should you monitor NAV on a daily basis?

As explained above, NAV is only the measure of the per unit value of the mutual fund at any point of time. This value does not reflect any future avenues or plans of the mutual fund that can assist or enable the investor in making an investment decision.

Difference between High and Low NAV

Let us assume an investor has to choose between two mutual funds having the same benchmark as well as securities in the same proportion but different NAVs. NAV of Fund 1 is Rs.100 while NAV of Fund 2 is Rs.50. The amount to be invested is Rs. 1,00,000. 

Incase of Fund 1, NAV being higher, the investor will get less number of units i.e., 1000 (Rs. 1,00,000/100).

Fund 2 NAV is lower so the investor will get relatively higher number of units i.e. 2000. Assuming both the funds have increases by 20%, the revised NAV of both funds is,

Fund 1 – Rs. 100 + 20% = Rs.120.

Fund 2 – Rs. 50 + 20% = Rs.60

Therefore, the increased or revised value of investment in both the funds is,

Fund 1 – Rs. 120*1000 = Rs. 1,20,000

Fund 2 – Rs. 60*2000 = Rs. 1,20,000

The above example shows that the NAV of any fund is irrelevant and cannot be used as a basis for making an investment decision. 

While investing in a mutual fund, the points to focus as an investor are,

  • The investment objective of the fund
  • Past performance of the fund
  • Risk appetite of the investor
  • Investment budget of the investor
  • Financial goals of the investor
  • Investment period 

NAV can be used only to know the per unit value of the mutual funds held and for monitoring everyday price movements and not to be used as a basis to make an investment decision.  


NAV is only the measure of performance of the underlying assets of the mutual fund and not a crucial factor to decide whether to invest in the fund or not. In India, a lot of importance is given to the NAV of the fund which often leads to an unfavorable investment decision. Newer mutual funds are bound to have lower NAVs but that does not necessarily indicate a favourable entry position in such funds.


1. Is the closing price of the stock relevant for calculating the NAV of the fund?
Yes. Closing prices of the underlying stocks or equity assets of the fund are used to determine the total assets portion for calculating the NAV of the fund.

2. Is the NAV of the fund calculated on a daily basis?
Yes. NAV of the fund is calculated on a daily basis considering the closing prices of the assets of the fund.

3. Which nav is considered if the units of a fund are bought on a holiday?
When units of a fund are bought on a holiday the NAV value at the end of the subsequent working day is considered to carry out the order.

4. Is NAV for a fund different in case of SIP or lump sum investment?
No. SIP or lump sum investment are the modes of making an investment in the mutual fund . The NAV of the fund does not change based on the investment mode.

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