---
title: "What Is NAV? Understanding Mutual Fund Net Asset Value"
description: "Learn what NAV means, how it's calculated daily, why a high NAV doesn't mean an expensive fund, and common myths about mutual fund NAV."
author: "isaac-turner"
published: "2026-04-19T00:00:00.000Z"
tags: ["mutual-funds","nav","investing-basics"]
canonical: "https://smartmoney.report/blog/posts/what-is-nav-understanding-mutual-fund-net-asset-value"
---

"Should I invest in a fund with a lower NAV because it's cheaper?" This is one of the most common questions — and misconceptions — among new mutual fund investors. Let's clear it up.

## What Is NAV?

**Net Asset Value (NAV)** is the per-unit market value of a mutual fund scheme. It represents the price at which you buy or sell units of a mutual fund.

**NAV = (Total Assets - Total Liabilities) ÷ Number of Outstanding Units**

### Example

A mutual fund holds:
- Stocks and bonds worth ₹500 crore
- Cash and receivables worth ₹10 crore
- Total liabilities (expenses, fees): ₹2 crore
- Outstanding units: 5 crore

NAV = (500 + 10 - 2) ÷ 5 = ₹508 ÷ 5 = **₹101.60 per unit**

## How Is NAV Calculated?

SEBI mandates that AMCs (Asset Management Companies) must calculate and publish NAV at the end of every business day. Here's the process:

1. **Market close (3:30 PM)** — The value of all securities in the portfolio is marked to market
2. **Add receivables** — Dividends, interest income accrued
3. **Subtract liabilities** — Management fees, administration costs, brokerage paid
4. **Divide by total units** — Gives the per-unit NAV
5. **Published by 11 PM** — Available on AMC websites and AMFI (amfiindia.com)

## The Biggest NAV Myth: "Low NAV = Cheap Fund"

This is **completely wrong**. NAV is not like a stock price. Here's why:

### Scenario: Two funds, same corpus

| Fund | Total AUM | Units | NAV |
|------|-----------|-------|-----|
| Fund A | ₹1,000 Cr | 10 Cr | ₹100 |
| Fund B | ₹1,000 Cr | 50 Cr | ₹20 |

If both funds grow by 10%, here's what happens:

| Fund | New AUM | New NAV | Your Return |
|------|---------|---------|-------------|
| Fund A | ₹1,100 Cr | ₹110 | **10%** |
| Fund B | ₹1,100 Cr | ₹22 | **10%** |

Your return is **identical** — 10% in both cases. The absolute NAV number doesn't matter; what matters is the **percentage change**.

### Why Do People Get Confused?

- **Stock market thinking** — With stocks, a lower price might mean undervaluation. With mutual funds, NAV is simply a function of how many units have been issued
- **NFO marketing** — New Fund Offers (NFOs) launch at ₹10 NAV, making people think they're getting a "discount." They're not — the fund has no track record at that point
- **Psychological comfort** — Getting 100 units at ₹10 NAV feels better than 10 units at ₹100 NAV, but the invested amount and returns are the same

## What Should You Actually Look At?

Instead of NAV, focus on these metrics:

1. **Rolling returns** — 1-year, 3-year, and 5-year rolling returns show consistency
2. **Expense ratio** — Lower is better. Direct plans have lower expense ratios than regular plans
3. **Benchmark comparison** — Is the fund beating its benchmark index?
4. **Fund manager track record** — Experience and performance across market cycles
5. **Portfolio composition** — Top holdings, sector allocation, and concentration risk
6. **AUM size** — Very large AUM can be a drag for small/mid-cap funds

## Direct vs Regular Plans: The NAV Connection

Every mutual fund has two NAV values:
- **Direct Plan NAV** — Higher (because no distributor commission is charged)
- **Regular Plan NAV** — Lower (distributor commission deducted from returns)

The difference in expense ratio (0.5-1.0% annually) compounds significantly over time. Always invest through **direct plans** via platforms like AMC websites, MF Central, Kuvera, or Groww.

## Key Takeaways

- NAV is simply the per-unit price of a mutual fund, calculated daily
- **A lower NAV does not mean a cheaper or better fund**
- Returns are measured in percentage terms, not absolute NAV change
- Focus on returns, expense ratio, and consistency — not NAV
- Always prefer direct plans over regular plans for better returns