All you want to know about mutual fund NAV

Net Asset Value (NAV) is the unit price of a mutual fund scheme. Mutual funds are bought or sold based on the NAV. Unlike share prices that changes constantly depending on the activities in the share market, the NAV is determined on a daily basis, and computed at the end of the day based on closing price of all the securities that the mutual fund owns after making appropriate adjustments. Investors should note that, the expenses of a mutual fund scheme like fund management, administration, distribution etc. are charged proportionately against the assets of the scheme and are adjusted in the NAV of the scheme.

Mutual fund scheme units are priced at par value or face value at the time of the New Funds Offer (NFO). The face value of the unit is usually Rs 10. The money pooled from different investors, also known as Assets under Management (AUM) is then invested in a portfolio of financial securities like stocks, bonds etc. The scheme NAV goes up or down depending on the market value of the securities. Schemes which are older are likely to have higher NAVs compared to schemes that are new because the NAVs of older schemes have had more time to grow.

Mutual fund NAVs are declared every day after the end of the market hours. They are available on the websites of Asset Management Companies (AMC), AMFI and also on mutual fund research websites like,,, etc.

There are several misconceptions about mutual fund NAVs.

  • Low NAVs are not necessarily cheap and high NAVs are not necessarily expensive. The NAV is derived from the value of the underlying securities of the scheme and the accumulated profit made by the scheme since inception. The NAV of a scheme by itself should not be a consideration in investment decisions.
  • Some investors think that NFOs are cheap because they are issued at par value (Rs 10). As mentioned earlier, the par value of a mutual fund unit is derived from the value of the underlying securities and the accumulated profits since inception. Two different mutual fund schemes may have exactly the same portfolio of securities and yet one may be offered at par value (NAV of Rs 10) while the NAV of the other scheme might be more than 100; the difference in price notwithstanding the intrinsic value of the both the schemes is exactly the same.
  • Schemes which pay high dividends do not necessarily give higher returns. You should know that, as per SEBI regulations, dividends can be paid only from the profits by schemes. Dividends are adjusted from the Net Asset Value of the scheme. For example, if a Scheme’s Net Asset Value is Rs 100, and the scheme declares a dividend of Rs 5, then the Net Asset Value (ex-dividend) will be fallen to Rs 95 after the dividend is declared. There won’t be any advantage investing in schemes which pay big dividends if you are interested in total returns.

NAV should not be a factor in selecting mutual fund schemes. The track record of the scheme and the fund manager in delivering superior risk adjusted returns or alpha can determine whether the scheme will give good returns in the future.

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