NAV is one of the most misunderstood terms in mutual funds. This module shows what NAV really measures, how it is calculated, why mark-to-market matters, and why a low NAV does not automatically mean a better opportunity.
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It is the value of one unit of the scheme based on the net assets of that scheme.
Take the scheme assets, subtract relevant liabilities, then divide by the number of outstanding units.
Because purchases and re-purchases in mutual funds are linked to NAV-based pricing.
Assets can include stocks, bonds, money market instruments, and income accrued but not yet received.
Fees payable, amounts payable on purchases, and other relevant liabilities reduce the net asset value available to unit holders.
After netting assets and liabilities, the scheme divides the result by the number of units outstanding.
Interest income, dividend income, realized gains, and appreciation in the portfolio can push NAV higher.
Losses, adverse market moves, and scheme expenses can pull NAV down.
Better portfolio performance and lower expenses help. Weak performance and higher expenses hurt.
It means valuing the securities in the portfolio at current market value instead of old purchase cost.
Because investors buy and sell units using NAV. So NAV should reflect the current worth of the underlying portfolio.
Old cost would make the portfolio value stale and unfair for incoming and exiting investors.
Because investors compare one unit price like a stock quote, but mutual fund NAV is not a bargain signal by itself.
The portfolio, category, cost, risk, and whether the scheme suits your purpose.
Do not choose a fund because NAV looks low. NAV is an accounting value per unit, not a discount tag.
Since entry load is not allowed, the sale price is effectively the applicable NAV, subject to transaction charge rules where relevant.
The investor exits at applicable NAV after deducting any exit load, if the scheme has one.
Because the actual transaction uses the NAV that applies to the submission and processing rules for that category.
It should help you track scheme value fairly, not decide quality by itself.
Look at category, portfolio behavior, expense ratio, and whether the fund objective matches your need.
NAV is useful when you understand what stands behind it. It is weak when you read it in isolation.
NAV is value per unit. Assets minus liabilities drive NAV. Outstanding units affect unit value.
Quote: A number becomes useful only when you know what stands behind it.
Next Module: Expense Ratio & Exit Load
Disclaimer: This content is for education only, not investment advice.
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