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NAV In Mutual Funds: Know All About It Here


A mutual fund is a collection of various types of funds managed by a fund manager. It is a basket of various funds like stocks, bonds and gold. Investing in mutual funds can be lucrative for investors if they do proper research before investing. The amount you pay for each fund unit when you acquire it, or the price you get when you sell it, is known as its Net Asset Value (NAV).

Let us take a closer look at the meaning of NAV in mutual funds.

What is NAV in Mutual funds?

The per-unit price of any mutual fund is known as the NAV. It's the cost of buying or selling mutual fund units. If you want to invest Rs 20,000 in a mutual fund with a NAV of Rs 100, you will purchase 200 (Rs 20000/ Rs 100) units. If you had deposited Rs 5000, you would have purchased 50 units of the mutual fund plan (Rs 5000/Rs 100).

Unlike share prices, which frequently fluctuate during trading hours, the NAV in mutual funds is calculated daily, using the closing price of all securities owned by the various mutual fund schemes after making suitable adjustments.

COPYRIGHT_BP: Published on https://bingepost.com/nav-in-mutual-funds-know-all-about-it-here/ by Hilda Workman on 2022-10-26T04:20:48.931Z

How is Market Price Different from NAV in Mutual Funds?

The market price is the current cost of purchasing or selling an asset or service. It is influenced by supply and demand dynamics. The market price is the price at which quantity provided equals quantity desired. On the other hand, NAV in mutual funds is determined by how much money is invested in it and its operating costs and outstanding shares.


How is NAV in Mutual Funds Calculated?

The NAV formula helps formulate the net value asset of mutual funds after each trading day for an investment fund based on closing market prices. To help you understand the NAV formula better, here is an example.

Let's imagine a mutual fund has $40 million in assets, with $35 million invested in securities and $5 million in cash. The fund has a $10 million liability. As a result, the fund's entire value would be $30 million. Here's how to use the NAV formula:

NAV= Assets-Expenses and liabilities / The number of outstanding units

Assets = total value of the fund's assets plus cash holdings

Expenses= Payable money/interest + expense ratio.

Value of assets (stocks+ bonds + other instruments)Rs 10,00,000
Expense ratio2%
LiabilitiesRs. 1,00,000
No. of units90,000

If we calculate NAV using the above figure, we can calculate Net value asset using the NAV formula:

NAV= [10,00,000 - (1,00,000+ (2%/365) *10,00,000]/ 90,000= Rs 9.99

The expense ratio is divided by a single day and then computed as a percentage of the asset's value in the NAV formula. This is how the NAV in mutual funds is calculated.

What Does an Asset's Net Value Mean to Investors?

Is the NAV so important? In mutual funds, the NAV determines how many units are assigned for the invested cash. As an investor, you should be more interested in the value of your investment than the number of units you own. The value of a mutual fund's NAV is more important than the scheme itself. In other words, return on investment should take precedence over NAV.


The NAV of a mutual fund can be used to track its past performance, as previously stated. The NAV has no bearing on your investment returns. A high or low NAV, for example, has no bearing on your returns.

When you examine the rise or decline in NAV for any fund, you can learn about the fund's growth trend and make wiser selections.


We have discussed what NAV in mutual funds is, how it can be calculated and how it affects a mutual fund's performance. NAV formula is used to deduce the net value asset of a mutual fund at the end of the day. The NAV merely affects how many units are allocated to you, depending on your investments. What counts is the increase in value of your investments, not the NAV at the time of purchase. NAV appreciation is far more significant than NAV itself.

Want to know more about NAV? If yes, you can check out Investment Simplified. It is a platform that aims to take the confusion out of investments. Head straight to their website and become an expert in all thing’s investment!

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About The Authors

Hilda Workman

Hilda Workman - Hilda Workman is a licensed financial advisor with years of expertise in the industry. She has assisted a range of clients, from sole proprietors to large corporations, in reaching their financial objectives. She is informed about many different financial subjects, including tax preparation, investment planning and also in fashion. She believes that the best things are those that are imperfect.

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