Things You Need To Know About Mutual Fund NAV

by Alina Khan

Published On April 3, 2024

In this article

The Net Asset Value (NAV) is a fundamental concept every investor should understand before diving into the world of mutual fund. Essentially, the NAV represents the total asset value per unit of the fund after subtracting the liabilities; it is the price at which investors buy and sell fund shares from the fund company. The calculation of NAV is straightforward: it involves dividing the total value of all the securities in a portfolio, minus any liabilities, by the number of fund shares outstanding at the end of each trading day.

Understanding what is NAV in mutual funds is crucial as it reflects the fund's performance and is a direct indicator of how well the mutual fund's assets are being managed, in relation to the market value of its investments. NAV fluctuates daily due to changes in the market value of the fund’s holdings and is published at the end of each trading day.

Investors who opt for Systematic Investment Plans (SIPs) should also grasp the importance of NAV in SIP transactions. Each SIP installment is used to purchase additional units of the fund at the current NAV, thus the number of units acquired each month varies depending on the NAV and the amount invested. This aspect is crucial because it impacts the cost averaging strategy and ultimately, the overall returns from the SIP.

For those looking to invest or currently investing in mutual funds, a thorough understanding of NAV helps in making informed decisions about when to enter or exit a fund, illustrating the performance of the investment over time relative to the market conditions.

Understanding NAV in Mutual Fund

Understanding the Net Asset Value (NAV) is crucial for any investor involved with mutual funds. NAV, the full form in mutual fund terminology being "Net Asset Value," essentially indicates the price at which units of the fund can be bought or sold. Here's a deeper look into NAV and its implications for investors:

  • Definition and Calculation: NAV in mutual funds is calculated by dividing the total value of all the securities in the fund's portfolio, minus any liabilities, by the number of units outstanding. This calculation is typically done at the end of each trading day by the fund house.

  • Importance in SIPs: When considering NAV in SIP (Systematic Investment Plan), it's important to understand that each installment of a SIP buys fund units at the prevailing NAV. This purchasing method leverages the benefit of rupee cost averaging, where the fluctuating NAV can lead to buying more units when prices are low and fewer when prices are high, potentially lowering the average cost per unit over time.

  • Assessing a Good NAV: The question of what is a good NAV for a mutual fund often arises, but it's important to note that a higher or lower NAV doesn't inherently make a mutual fund better or worse for investment. Performance relative to the market and similar funds should be the focus, rather than the NAV itself.

  • NAV and Fund Performance: Investors sometimes misconstrue NAV as a scorecard of fund performance, but it should be viewed in context. NAV reflects current market values and the fund's liabilities, and while it provides a snapshot of fund value, the historical performance and future potential are more crucial for making investment decisions.

  • Timing and NAV: While some might try to time their investments based on NAV, such practices are less effective in mutual funds compared to direct stock investments. In mutual funds, a consistent investment approach, like SIPs, tends to yield better long-term results irrespective of the daily NAV fluctuations.

By fully grasping what NAV is in a mutual fund and how it affects investments like SIPs, investors can make more informed decisions, focusing less on the NAV itself and more on the overall performance and management of the fund.

Things You Need to Know About Mutual Fund NAV

Navigating through the intricacies of mutual fund NAV (Net Asset Value) can significantly enhance an investor's understanding and decision-making process when it comes to mutual fund investments. Here are some essential aspects you should know about NAV:

  • NAV Full Form in Mutual Fund: NAV stands for Net Asset Value. It represents the per-unit price of the mutual fund at the end of the trading day, based on the current market value of the fund's holdings minus its liabilities.

  • Calculation Frequency: NAV in mutual funds is calculated at the close of every trading day. This reflects any daily changes in the market value of the fund’s investments.

  • Impact on SIPs: Understanding NAV in SIP (Systematic Investment Plan) setups is vital. Each SIP payment purchases units at the prevailing NAV, so the timing of the investment can affect the number of units you get. However, over time, SIP helps in mitigating the impact of NAV fluctuations through rupee-cost averaging.

  • Misconceptions About High and Low NAV: Often, investors ponder what is a good NAV for a mutual fund, believing that a lower NAV is cheaper and thus better. However, the absolute value of NAV is irrelevant in assessing a fund's quality. The performance should instead be compared based on the percentage return over a period.

  • Relevance to Fund Performance: While NAV provides a measure of current value, it does not necessarily indicate the health or performance of the fund. Investors should look beyond NAV to factors like the fund's historical return, expense ratio, fund manager’s performance, and investment strategy.

  • Importance for Buying and Selling: NAV is crucial as it determines the buy and sell price of mutual fund units. When you invest, you buy at the NAV, and when you redeem, you sell at the NAV minus any applicable exit fees.

Understanding these key points about what is NAV in mutual fund, how it impacts investments like SIPs, and dispelling common myths can lead to more strategic investment choices. These insights equip investors with the knowledge to focus on the more critical elements that affect mutual fund performance, rather than merely the NAV itself.

NAV vs. Market Price: Differences and Significance

Understanding the differences between NAV (Net Asset Value) and market price is crucial for investors in mutual fund and other securities. Here’s a detailed comparison presented in a tabular format:


NAV (Net Asset Value)

Market Price


NAV is the per-share value of the mutual fund's assets minus its liabilities, calculated at the end of each trading day.

Market price is the current price at which a security, such as a stock or ETF, can be bought or sold in the market.


Calculated by dividing the total value of all the assets in the portfolio, minus liabilities, by the number of shares outstanding.

Determined by supply and demand dynamics in the stock market and can fluctuate considerably throughout the trading day.


Used to determine the buy and sell price of mutual fund units. Buyers pay the NAV per unit, and sellers receive the NAV per unit, adjusted for any load or fees.

Used for buying and selling stocks and ETFs. The market price is what investors pay or receive on the open market.


Updated at the end of each trading day to reflect the changes in the value of the fund's holdings.

Fluctuates in real-time during trading hours based on buying and selling activity in the market.

Significance in SIPs

In SIP (Systematic Investment Plan) , each installment buys mutual fund units at the prevailing NAV, allowing for rupee-cost averaging.

Not directly applicable to SIPs as they specifically relate to mutual funds, which use NAV, not market price.

Impact on Investors

Directly affects mutual fund investors as it determines the exact amount of money they will need to pay or receive upon transactions.

Affects investors in stocks and ETFs as it reflects real-time valuation and investor sentiment in the market.

Importance of NAV in Mutual Fund Investing

The Net Asset Value (NAV) plays a pivotal role in mutual fund investing, serving as a critical metric for both valuation and transaction purposes. Understanding the significance of NAV can help investors make more informed decisions regarding their mutual fund investments. Here are some key aspects of the importance of NAV in mutual fund investing:

  • Benchmark for Performance: NAV is essential as it provides a daily valuation of a mutual fund's assets minus its liabilities, offering a clear indicator of the fund's performance. Investors can track changes in the NAV over time to gauge the effectiveness of the fund manager's investment strategy.

  • Investment Decisions: When investing in mutual funds, the purchase and redemption of fund units are based on the fund’s NAV. Therefore, knowing the "NAV in mutual funds" allows investors to understand how much they are paying for units of a mutual fund or receiving when they sell.

  • Impact on SIPs: The concept of "NAV in SIP" is particularly important for systematic investors. Since each SIP installment buys units at the current NAV, understanding how NAV works helps investors appreciate the benefit of rupee-cost averaging, which can smooth out the purchasing price over time in volatile markets.

  • Transparency and Fairness: The "nav full form in mutual fund" (Net Asset Value) system ensures that all transactions in the fund's shares are done fairly, at a price that reflects the fund's current value per share. This transparency is crucial for investor confidence and fairness.

  • Evaluating Fund Health: While "what is a good nav for a mutual fund" doesn't necessarily relate to the fund's affordability, tracking the NAV trends can help investors evaluate the overall health and performance of the fund compared to its peers and the broader market.

NAV is not just a number—it is a fundamental component that reflects the intrinsic value of mutual fund investments and influences every buy and sell decision in the fund's lifecycle.

Read this article to get started with SIP Investment Guide: What is SIP, How to Start, Benefits, & Is It Worth It

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Understanding NAV and AUM (Assets Under Management)

Understanding the relationship between Net Asset Value (NAV) and Assets Under Management (AUM) is crucial for any mutual fund investor. NAV, as previously defined, is the per unit value of the fund's assets minus liabilities, calculated daily. The NAV full form in mutual fund context, "Net Asset Value," provides a clear snapshot of what each unit of the fund is worth on any given day. On the other hand, AUM represents the total market value of all the assets managed by the mutual fund, indicating the scale or size of the fund.

The NAV is instrumental for practical investment decisions, as it dictates the buying and selling price of mutual fund units. When discussing "what is NAV in mutual fund," it's essential to understand that while NAV gives an idea of the unit cost, AUM provides insight into the fund’s overall performance and management effectiveness. Larger AUM can indicate trust and success, drawing more investors, although it's not always a marker of fund quality.

In the context of SIPs, or Systematic Investment Plans, the term "NAV in SIP" highlights how each investment installment is used to purchase fund units at the prevailing NAV. This impacts how many units an investor can purchase with each installment, which can vary with the NAV at each buying point. Hence, understanding the dynamics of NAV helps investors strategize their entries and exits from the fund, optimizing their investment according to market conditions.

Furthermore, when investors inquire, "what is a good NAV for a mutual fund," they are often trying to assess the fund's potential for growth. However, a high or low NAV in itself doesn’t necessarily indicate a good or bad investment; instead, changes in NAV should be viewed in conjunction with AUM growth over time. A fund with a growing AUM and stable or increasing NAV typically suggests effective management and healthy fund performance.

Both NAV and AUM are fundamental concepts when we talk about mutual funds, each serving different purposes. NAV provides the value at which shares are transacted, directly affecting investors’ costs and returns, while AUM offers a broader view of the fund’s scale, stability, and the confidence it commands in the marketplace. Understanding these metrics in relation to each other enhances an investor’s ability to make informed decisions, ensuring alignment with their financial goals and risk tolerance .

NAV in Systematic Investment Plans (SIPs)

The role of Net Asset Value (NAV) in Systematic Investment Plans (SIPs) is vital for understanding how these regular investments grow over time. NAV, or the price per mutual fund unit, directly influences the purchasing power of each SIP installment. When discussing "what is NAV in mutual fund ," it's essential to recognize that in the context of SIPs, the NAV determines how many units an investor can buy with their fixed SIP installment.

Since the NAV fluctuates daily based on market conditions, each SIP payment buys units at different NAVs. This variability in "NAV in SIP" plays a crucial role in the cost averaging strategy, where the risk of market timing is minimized as investments are spread over various market phases. Thus, the changing NAV allows investors to purchase more units when prices are low and fewer when prices are high, which can lead to potentially higher returns over the investment period without the need for active market monitoring. This makes understanding NAV crucial for anyone engaged in SIPs, providing a clear perspective on how their contributions are being utilized and the value they are accumulating.

Read this article on SIP vs STP: Understanding Key Differences and Strategies

Which NAV Value Is Considered When Making a Mutual Fund Purchase in the Evening?

When you make a mutual fund purchase in the evening, the NAV that is considered for buying the units is not the NAV of the day you place the order, but rather the NAV of the next trading day. Mutual funds in India process buy and sell orders based on the NAV of the day the funds are actually received by the fund house, provided the order is placed within the cutoff time.

For most equity and debt mutual funds, the cutoff time is typically 3 PM. This means that if you place your order and the money reaches the mutual fund house before 3 PM on a trading day, the NAV of that day is applied. If the order and funds are received after 3 PM, the NAV applied will be of the next trading day.

This rule ensures that all investors are treated fairly, with the NAV applied only after the fund has received the money, reflecting the actual market conditions at the time the investment is made.

NAV Volatility and Risk Management

NAV (Net Asset Value) volatility is a crucial factor in mutual fund investing, directly impacting the risk and return profile of an investment. Volatility in NAV arises primarily from fluctuations in the market values of the securities held by the mutual fund. As these asset values increase or decrease based on market conditions, the NAV of the fund correspondingly adjusts, reflecting the current value of a unit of the fund.

Effective risk management strategies are essential to mitigate the effects of NAV volatility. Fund managers often diversify the fund’s portfolio across various asset classes, sectors, and geographies to spread out risk. Diversification helps ensure that a decline in one sector or market does not disproportionately affect the overall fund performance, thereby stabilizing the NAV.

Moreover, for individual investors, understanding the implications of NAV volatility can aid in better portfolio management. By assessing their risk tolerance and investment horizon, investors can choose funds whose NAV volatility aligns with their financial goals and risk appetite. For example, equity funds typically exhibit higher NAV volatility compared to debt funds, reflecting the generally more volatile nature of stock markets compared to bond markets.

Investors can also use systematic investment plans (SIPs) as a tool to manage NAV volatility. By investing a fixed amount regularly, investors benefit from rupee-cost averaging, which can reduce the risk of investing a large amount at an inopportune time when NAV might be high. Over time, this strategy can help in reducing the average cost per unit of investment, despite fluctuations in the NAV.

Overall, while NAV volatility is an inherent aspect of mutual fund investing, through strategic planning, portfolio diversification, and regular investing, both fund managers and investors can effectively manage risks associated with NAV fluctuations. This careful approach ensures that the investments are better positioned to achieve growth over the long term while managing the bumps along the way.

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Frequently Asked Questions

  1. How does NAV affect my investment returns?

NAV affects your investment returns as it determines the price at which you buy and sell mutual fund units. A higher NAV at the time of selling than at buying results in a profit, whereas a lower NAV leads to a loss.

  1. Is NAV the same for all mutual funds?

No, NAV is not the same for all mutual funds. Each fund has its own NAV that reflects the current market value of the fund's holdings divided by the number of outstanding shares.

  1. When is NAV updated?

NAV is typically updated at the end of each trading day after the market closes. The precise timing can vary, but it generally reflects the value of the fund's assets at the close of the market.

  1. Can NAV change throughout the day?

No, NAV does not change throughout the day. It is calculated once at the end of the trading day based on the closing prices of the securities that the fund holds.

  1. What factors contribute to NAV fluctuations?

NAV fluctuations are influenced by changes in the market value of the fund’s investments, investor inflows and outflows from the fund, and fund expenses. Market performance, economic indicators, and changes in interest rates can all impact the NAV.

  1. How often should I monitor NAV?

The frequency of monitoring NAV should align with your investment strategy and horizon. For long-term investments, occasional monitoring (e.g., monthly or quarterly) is typically sufficient. More frequent monitoring might be necessary for tactical adjustments in a more active investment approach.

Read these articles to understand all about mutual funds, SIPs and how you can invest in mutual funds with Wright Research:

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