How NAV in Mutual Funds Works and Why It Is Often Misunderstood

Date : September 14,2025

Summary

In this blog, we explained what is NAV in mutual funds. We looked at how it’s calculated and why it changes daily. We cleared up common misunderstandings. A high NAV isn’t always better. A low NAV isn’t always cheaper. We also showed how timing affects the NAV you get. And why NAV alone shouldn’t guide your choices. The key is to look beyond numbers. Focus on the fund’s management and strategy. See how it fits your needs. If it feels confusing, a Mutual Fund Distributor can help. This blog is about cutting through noise. Helping you invest smarter and with confidence.

Introduction
Numbers have a strange way of tricking us. A smaller number feels friendlier. A bigger one feels intimidating. This often happens at the grocery store. It happens when we bargain. And, more often than we admit, it happens when we invest in mutual funds.

That’s why so many people look at NAV like it’s a price tag.
₹9? Must be cheap.
₹150? Must be expensive.
But NAV doesn’t play by those rules.
It’s not a sale sign.
It’s not a “discounted” entry into a fund.

Still, the myth survives. Because our brains love simple shortcuts. And NAV looks like one.

What no one makes crystal clear is this — NAV is not a measure of how “cheap” or “expensive” a mutual fund is. It’s simply the value of one unit of the fund at a given moment.
Nothing more, nothing less.

In this blog, we’ll strip away the confusion.

We’ll see what NAV really means, how it’s calculated, and why a low NAV doesn’t mean a better deal. And yes, we’ll bust a few myths along the way.

What is NAV in Mutual Funds?

NAV means Net Asset Value. It is the market value of one unit of a mutual fund. But how do they arrive at it?

Here is a simple formula:

NAV= Total Market Value of Fund’s Investments / Number of Units Issued

Here’s how it works:

Add up the current market value of everything the fund owns — shares, bonds, cash, etc.
Subtract any expenses or liabilities the fund has.
Divide that total by the number of units the fund has issued.

Let’s take an example.

Suppose the fund’s total holdings are worth ₹200 lakh.
The fund has issued 10 lakh units.

NAV = ₹200 lakh ÷ 10 lakh units = ₹20 per unit.

That’s it — ₹20 is the market value of one unit of the fund. But here’s the thing — it never stays the same. Markets move every day. Stock prices go up and down. Bond values change. Because of that, NAV changes daily, too. If you’re wondering where to check it, it’s easy.

Every fund house publishes its NAV on its own website.
AMFI (Association of Mutual Funds in India) lists all funds’ NAVs in one place.

When is NAV Calculated and which NAV Do You Get?

NAV is not like a stock price. It is calculated once daily, after markets close. The fund house adds up the value of all holdings, subtracts expenses, and divides by total units. This gives the day’s NAV per unit, as per SEBI rules.

Which NAV Do You Get?

The NAV you get is based on end-of-day valuation, not the exact time you placed the order. What matters are two things:

When you submit your purchase/redemption request (cut-off time).
When your money is actually available for utilisation by the fund house (without using any credit facility).

Cut-off Timings & Applicable NAV

Equity & Debt Funds (other than Liquid & Overnight Funds) – Purchases / Switch-ins

Cut-off time: 3:00 PM
Applicable NAV:

If funds are available for utilisation before 3:00 PM → Same business day’s NAV.
If funds are available after 3:00 PM → Next business day’s NAV.

Equity & Debt Funds (other than Liquid Funds) – Redemptions / Switch-outs

Cut-off time: 3:00 PM
Applicable NAV:

Application received before 3:00 PM → Same business day’s NAV.
Application received after 3:00 PM → Next business day’s NAV.

Source- AMFI

Does a Higher NAV Mean the Fund is More Expensive or Better?

When you see a high NAV, it’s easy to think the fund is premium. In reality, it often just means the fund has been around longer or its investments have grown steadily over time. It’s simply a reflection of the fund’s journey, not a badge of quality.

Two funds can have very different NAVs and still offer the same potential. One may have launched years earlier. Another may have started with more capital. These factors change the NAV, but not future performance.

Let’s take an example:
Fund A has a NAV of ₹150.
Fund B has a NAV of ₹15.

You invest ₹10,000 in each.
If both funds grow by 10% in a year, Fund A’s NAV moves to ₹165.
Fund B’s NAV moves to ₹16.50.
In both cases, you’ve made ₹1,000.

The growth is the same because returns depend on the percentage gain, not the starting NAV. High or low, the number itself doesn’t decide your outcome.

What matters is how the fund is managed today. Its portfolio, performance track record, and how well it fits your financial objectives. If you can’t spare time for this, connect with a Mutual Fund Distributor— they can guide you based on your risk profile and financial needs.

Conclusion

Investing in mutual funds isn’t about hunting for a “cheap” number or a “high” number to feel confident. Numbers like NAV are markers, not destinations. Your focus should be on strategy, discipline, and context.

You must ask yourself:

What do I really want from this investment?
How does this fund fit into my long term needs?
Am I ready to stay patient through ups and downs?

This mindset helps you avoid traps. Don’t get stuck on daily NAV changes. Don’t compare NAVs blindly. And when things get complex, don’t hesitate to seek help. A Mutual Fund Distributor can help you translate these markers into meaningful steps forward.

FAQ’s

1) Should I check NAV every day?

Not really. NAV moves daily, but that doesn’t change your long-term returns. Checking too often can just make you anxious.

2) Does a mutual fund with ₹10 NAV grow faster than one with ₹100 NAV?

No. The speed of growth depends on the investments inside the fund, not the NAV number itself.

3) Should I decide which fund to buy only by looking at NAV?

No. NAV alone doesn’t show whether a fund is good. It’s better to take the guidance of fund’s portfolio, performance history, management, and how it fits your financial needs.

4) If I invest ₹10,000 in two funds with different NAVs, will my returns be different?

No. Returns depend on the fund’s growth percentage, not the starting NAV. Both can give the same profit in percentage terms.

Mutual fund investments are subject to market risks, read all the scheme related documents carefully.