What Is NAV in Mutual Funds? And Why a Low NAV Isn't 'Cheap'
Published 2026-10-16 · Aadarna Stock Broking Pvt. Ltd.
Key takeaways
- NAV is the per-unit value of a mutual fund scheme's holdings after expenses.
- A low NAV does not mean a fund is cheap or will grow faster.
- The NAV you get depends on when your money reaches the fund house, not when you click invest.
- Look at the scheme's objective, riskometer and costs, not its NAV, to understand it.
When you invest in a mutual fund, you buy units. The price of one unit is called its Net Asset Value (NAV). Many new investors look at the NAV first, but it tells you much less than you might think.
This guide explains what NAV is, how it is calculated and how it affects your purchases and redemptions.
What does NAV mean?
NAV is the value of everything a scheme owns, minus what it owes, divided by the number of units issued. It is calculated and published by the fund house for every business day, based on the closing prices of the scheme's investments.
For example, say a scheme holds investments worth ₹100 crore, has expenses of ₹1 crore due, and has issued 9.9 crore units. Its NAV would be ₹10 per unit.
Why a low NAV isn't 'cheap'
A share's price and a fund's NAV are different kinds of numbers. If two schemes hold exactly the same investments, a gain in those investments moves both NAVs by the same percentage, whatever their starting NAV.
So a scheme with a lower NAV is not a bargain, and a higher NAV is not expensive. A scheme that has existed for longer often has a higher NAV simply because of time. What matters is what the scheme invests in, its costs and its risk.
Which NAV do you get?
When you buy or redeem units, the NAV applied depends on:
- The cut-off time set under SEBI rules for that type of scheme.
- When your money actually reaches the fund house's account, for purchases.
- Whether the day is a business day.
If your money reaches the fund house after the cut-off, you get the next business day's NAV. Check the current cut-off rules in the scheme documents or on the AMFI website.
NAV and dividends (IDCW)
Some schemes offer an IDCW option (Income Distribution cum Capital Withdrawal), earlier called the dividend option. When a payout is made, the NAV falls by about the amount paid out, because that money leaves the scheme. A payout is not extra profit; it is part of your own investment value being paid to you. In the growth option, nothing is paid out and the value stays invested.
What to look at instead
- The scheme's investment objective and what it actually invests in.
- Its riskometer level.
- Its expense ratio.
- Whether it suits how long you can stay invested and how much fluctuation you can tolerate.
- The Scheme Information Document and Key Information Memorandum.
Where to see a scheme's NAV
NAVs are published daily on the fund house's website and on the AMFI website. Your account statement and Consolidated Account Statement also show the NAV used for each of your transactions and the latest value of your holdings.
Frequently asked questions
Does a higher NAV mean the fund has done well?
Not on its own. An older scheme may have a higher NAV simply because it has existed longer. Past performance may or may not be sustained in future.
Should I wait for the NAV to fall before investing?
Trying to time NAV movements is hard to do consistently. Your decision should depend on whether the scheme suits your goals, time horizon and risk tolerance.
Why did my scheme's NAV fall after a payout?
In the IDCW option, the payout comes out of the scheme's assets, so the NAV falls by about the amount paid.
Sources
Risk disclosures on derivatives
- 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
- On an average, loss makers registered net trading loss close to ₹50,000.
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
- Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Source: SEBI study dated January 25, 2023 on "Analysis of Profit and Loss of Individual Traders dealing in equity Futures and Options (F&O) Segment", wherein Aggregate Level findings are based on annual Profit/Loss incurred by individual traders in equity F&O during FY 2021-22.