NAV (Net Asset Value)
Full form: Net Asset Value
NAV stands for Net Asset Value. It is the value of one unit of a mutual fund, worked out by taking everything the fund owns, subtracting what it owes, and dividing by the number of units. A fund declares its NAV at the end of each working day.
How NAV is worked out
NAV equals the value of the fund's investments plus cash, minus its liabilities, divided by the number of units in issue. The investments are valued at that day's closing market prices, which is why a fund's NAV changes every day with the market.
How NAV is used
When you buy or sell a mutual fund, the price you get is the applicable NAV. For most funds, an order placed before the fund's cut-off time on a working day receives that day's NAV, and a later order receives the next working day's. Each fund house sets and publishes its own cut-off times.
A low NAV is not a bargain
NAV is not a price tag that shows whether a fund is cheap. A fund with an NAV of ₹20 and a fund with an NAV of ₹500 can grow by exactly the same percentage. What matters is how much the NAV rises or falls from the day you invest, not the number it starts at.
Where to find the NAV
Fund houses publish the NAV of every scheme each day. AMFI, the Association of Mutual Funds in India, also lists them on its website, and your investment app shows the latest figure.
NAV and ETFs
An ETF also has an NAV, but its units trade on the exchange at a market price that can differ slightly from it, which is one way an ETF differs from an ordinary fund.
Working out an NAV (hypothetical numbers)
A fund holds investments worth ₹1,010 crore and has liabilities of ₹10 crore, with 10 crore units in issue. The NAV is (₹1,010 crore minus ₹10 crore) divided by 10 crore, which is ₹100.
If you invest ₹10,000 at this NAV you receive 100 units. If the NAV later rises to ₹110, your 100 units are worth ₹11,000, a rise of 10%.
Common questions
- What is the full form of NAV?
- Net Asset Value.
- Is a high NAV good or bad?
- Neither. The size of the NAV says nothing about how good a fund is. What counts is the percentage change in NAV over the time you hold the fund.
- How often is NAV declared?
- For most mutual funds, every working day after the markets close.
- Can the NAV fall below the price I paid?
- Yes. A fund's NAV rises and falls with the value of what it holds, so your units can be worth less than you paid.