How NAV is calculated — and why a 'low' NAV is not a cheap fund
NAV is just the per-unit price of a fund. A ₹15 NAV fund is not cheaper or better than a ₹500 one — here's the arithmetic that proves it.
NAV (Net Asset Value) is the per-unit price of a mutual fund. It's calculated once every business day, after markets close:
NAV = (value of all the fund's holdings − expenses) ÷ total units outstanding
So if a fund holds ₹1,000 crore of stocks and has 50 crore units, its NAV is ₹20. When the underlying stocks rise 1%, the NAV rises ~1%. That's the whole mechanism.
The myth that costs people money
"Fund A's NAV is ₹15 and Fund B's is ₹500 — A is cheaper, so I'll buy more units of A."
This is the single most common beginner mistake, and it's wrong. NAV level tells you nothing about how cheap, good, or high-potential a fund is. Watch:
| Fund A | Fund B | |
|---|---|---|
| You invest | ₹10,000 | ₹10,000 |
| NAV | ₹15 | ₹500 |
| Units you get | 666.7 | 20 |
| Both funds rise 10% | NAV → ₹16.50 | NAV → ₹550 |
| Your value | ₹11,000 | ₹11,000 |
Identical outcome. More units at a lower price is exactly offset by fewer units at a higher price. What grows your money is the percentage return, and NAV level has no bearing on that.
Why NAVs differ between funds
A higher NAV usually just means the fund has existed longer and compounded more — a ₹500 NAV is often a good sign (a long, successful track record), not an expensive one. A brand-new fund launches at ₹10 by convention; that doesn't make it a bargain.
What NAV IS useful for
- Computing your holding's current value: units × latest NAV.
- Computing returns over time (the % change in NAV, which is what XIRR and CAGR measure).
- Confirming your buy/sell price — you get the NAV of the day your transaction is processed.
So when you compare funds, ignore the NAV number entirely and look at returns, FundScore and cost. NAV is a unit price, not a price tag.
NiveshLens is an independent analytics platform, not a SEBI-registered investment adviser. Everything above is education — how these products work — not a recommendation to buy or sell anything. Verify current figures before acting.