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It’s not the price that matters—it’s what’s inside.
When new investors look at mutual funds, one of the first things they notice is the NAV—the Net Asset Value.
Some people assume a lower NAV means a “cheaper” or “better” fund. Others avoid funds with a higher NAV thinking they’ve already “missed the bus.”
But here’s the truth: NAV is not like a stock price. It’s simply a number that reflects the value of one unit of a mutual fund. It tells you nothing about whether the fund is expensive, cheap, or even suitable for your goals.
Let’s break down what NAV really is—and more importantly, what it isn’t.
1. What Is NAV?
NAV (Net Asset Value) is the per-unit value of a mutual fund’s total assets, after accounting for all liabilities.
It’s calculated daily as:
NAV = (Total value of assets – liabilities) / Total number of units outstanding
For example:
A mutual fund holds ₹100 crore in assets
Has 10 crore units issued
NAV = ₹10 per unit
If the fund grows and the asset value becomes ₹120 crore, with the same number of units:
New NAV = ₹12
So NAV reflects the growth of the fund, not its cost to you.
2. NAV ≠ Stock Price
Many investors confuse NAV with a share price. But they function very differently:
Feature | NAV (Mutual Fund) | Share Price (Stock) |
Represents | Value of 1 unit of a fund | Market price of 1 share |
Influenced by | Underlying portfolio value | Demand-supply in stock market |
Affects returns? | ❌ No | ✅ Yes, if buying/selling shares |
Changes | Once daily (post market close) | Live throughout trading hours |
A fund with ₹100 NAV can give higher returns than one with ₹10 NAV—it all depends on the fund’s performance, not the number.
3. Does a Lower NAV Mean a Cheaper Fund?
No. Lower NAV just means the fund has fewer accumulated gains or has been launched recently. It’s not “cheaper” in terms of value.
Let’s say:
Fund A has NAV ₹10
Fund B has NAV ₹100
You invest ₹10,000 in both.
Fund A gives you 1,000 units
Fund B gives you 100 units
If both grow 10%:
Fund A NAV = ₹11 → Value = ₹11,000
Fund B NAV = ₹110 → Value = ₹11,000
Same return, same gain—different NAV.
NAV doesn’t impact the percentage return you earn. It just affects how many units you get.
4. Why NAV Still Matters
Even though NAV doesn’t indicate performance potential, it’s useful for:
Tracking growth over time
(An NAV moving from ₹10 to ₹20 = 100% return)
Tax calculations
(Capital gains are calculated using purchase NAV vs redemption NAV)
SIP unit accounting
(Each installment buys units based on the NAV on that day)
Think of NAV like the price tag on a mutual fund unit—not an indicator of value.
5. Focus on What Matters More Than NAV
When choosing a mutual fund, don’t judge it by its NAV.
Instead, look at:
Fund category (large-cap, flexi-cap, hybrid, etc.)
Past performance consistency
Risk-return profile
Expense ratio
Fund manager track record
Investment style and portfolio quality
A low NAV with poor underlying assets won’t deliver. A high NAV with strong, compounding assets will.
6. Real-World Misconception Example
Many NFOs (New Fund Offers) are launched with a NAV of ₹10.
Investors think: “It’s cheap—I’ll get in early.”
But unless the fund performs well, NAV stays stagnant or drops. Meanwhile, older funds with higher NAVs may have already compounded strongly.
New ≠ Better. Low NAV ≠ Higher growth potential.
Always compare based on quality—not starting NAV.
TL;DR — Too Long; Didn’t Read
NAV = Net Asset Value = value of 1 mutual fund unit
It’s not a stock price and doesn’t indicate if a fund is cheap or expensive
Your returns depend on percentage growth, not NAV level
Use NAV to track growth, not to judge fund quality
Focus on fund performance, portfolio quality, and goals—not just the NAV
