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What is NAV of mutual funds

What is NAV of Mutual Funds is a common question asked by the investors while investing in mutual funds.


NAV of mutual funds stands for Net Asset Value and is the unit price of a Mutual Fund scheme. Mutual Funds are bought and/or sold on the basis of NAV. NAV of a Mutual Funds is taken into account on a daily basis, after the closure of markets. The closing prices of all the securities and stocks that are a part of the Mutual Fund investment are taken into consideration to determine the NAV of the mutual funds scheme of that particular day. This is unlike share prices which fluctuate during trading hours.


Read what are mutual funds in India?


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 mutual funds schemes. The NAV of mutual funds in the public domain is post adjustment of the expenses incurred.


Apart from respective Asset Management Companies in India (AMCs), the Association of Mutual Funds in India (AMFIC) release the NAV of mutual funds in India for all schemes of all AMCs on a daily basis. This is the single and most reliable source of getting NAV of Mutual Funds in India.


You may visit this website http://www.amfiindia.com/net-asset-value to see the latest as well as the historical NAVs of Mutual Funds.


Mutual fund scheme units are priced at par value or face value which is usually at Rs 10, at the time of the New Fund Offer (NFO). The NAV of Mutual Fund scheme goes up or down depending on the closing market value of the respective securities held in the portfolio. Schemes which are older are likely to have higher NAVs compared to the schemes that are new because the NAVs of older schemes have had more time to grow.


There are certain misconceptions related to NAV. Some of them are:


  • Low NAV of Mutual Funds are not indicative of cheap fund and high NAV of Mutual Funds are not indicative of expensive funds. The NAV is an indicator of the value of the underlying investments in the scheme and the profit accumulated since. The NAV of Mutual Fund scheme should not be the sole consideration in making investment decisions.

  • Investors tend to think that NFOs are cheap because they are issued at par value (Rs 10). This is a flawed understanding as the value of the NAV is accounted on the basis of the value of the underlying securities and accumulated profits. There might be two different mutual fund schemes having exactly the same portfolio of securities. Yet, the NAV of one may be offered at par value (NAV of Rs 10)through a new fund offer (NFO) while the NAV of the other scheme might be offered at a high value as it has been in the market for a longer period of time. The difference in NAV per unit is not indicative of the intrinsic value of the product.

  • High dividend generating schemes are not equivalent to high return generating schemes.As per SEBI regulations, dividends can be paid only from the profits made by schemes or from the scheme reserves. Dividends are adjusted against the NAV of the mutual fund scheme.

    For example, if the NAV of a mutual fund scheme is Rs 50 and the scheme declares a dividend of Rs 5, the NAV (ex-dividend) will fall to Rs 45 just after the dividend is declared. There are no advantages in investing in dividend paying schemes unless you are looking for regular return from your investments. Therefore, if you are interested at lump sum returns or have a long term plan of investment, the growth option is better as you can benefit from power of compounding.

Read more about common misconceptions about Mutual Fund NAV


NAV of a Mutual Funds schemes should not be a major determinant in your investment decisions. Factors such as past performance, the track record of the AMC in case of a new fund, the fund manager’s ability to generate risk adjusted returns (also known as Alpha) should be the major factors in taking investment decisions.


See the list of top performing mutual funds in India


Now that you know what is NAV in mutual funds in India, you must also know what are the benefits of investing in Mutual Funds in India

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