Chapter 3: Mutual Funds & SIP
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Day 17: NAV — The Mutual Fund's Price Tag
It's not like a share price — and that's a very important distinction
2 min read
📖 The Property Valuation Analogy
Imagine a fund owns 10 flats in different cities. At the end of each day, someone values each flat at current market rates. Total value of all 10 flats divided by the number of ownership units = price per unit.
That daily calculation is called NAV. Net Asset Value. It's literally "what is each unit worth today after accounting for all assets and expenses?"
And unlike stocks, this number is calculated only ONCE per day — after market closes. No second-by-second panic refreshing required. 🏠
Imagine a fund owns 10 flats in different cities. At the end of each day, someone values each flat at current market rates. Total value of all 10 flats divided by the number of ownership units = price per unit.
That daily calculation is called NAV. Net Asset Value. It's literally "what is each unit worth today after accounting for all assets and expenses?"
And unlike stocks, this number is calculated only ONCE per day — after market closes. No second-by-second panic refreshing required. 🏠
NAV Formula
NAV = (Total Assets of Fund − Expenses) / Number of Units Outstanding
Example: A fund owns stocks worth ₹500 crore.
Expenses today: ₹2 lakh (management fees etc.)
Total units outstanding: 5 crore
NAV = (500 crore − 0.2 crore) / 5 crore = ₹99.96 per unit
This calculation happens EVERY day at market close. Announced after 9 PM.
Example: A fund owns stocks worth ₹500 crore.
Expenses today: ₹2 lakh (management fees etc.)
Total units outstanding: 5 crore
NAV = (500 crore − 0.2 crore) / 5 crore = ₹99.96 per unit
This calculation happens EVERY day at market close. Announced after 9 PM.
How Units Work
When you invest ₹5,000 in a fund with NAV of ₹82.45:
Units received = ₹5,000 / ₹82.45 = 60.64 units
Yes, fractional units! You get exactly ₹5,000 worth regardless of "clean" numbers.
Six months later, NAV rises to ₹100.
Your portfolio value = 60.64 × ₹100 = ₹6,064
Profit = ₹1,064 on ₹5,000 = 21.3% return in 6 months! 🎉
Units received = ₹5,000 / ₹82.45 = 60.64 units
Yes, fractional units! You get exactly ₹5,000 worth regardless of "clean" numbers.
Six months later, NAV rises to ₹100.
Your portfolio value = 60.64 × ₹100 = ₹6,064
Profit = ₹1,064 on ₹5,000 = 21.3% return in 6 months! 🎉
The Biggest NAV Misconception
⚠️ "Fund A has NAV ₹10, Fund B has NAV ₹500 — Fund A is cheaper and better value!" — WRONG!
NAV level means absolutely nothing by itself. A low NAV just means the fund is newer (started at ₹10). A high NAV means it's been running longer or has grown more.
A fund with NAV ₹500 that has generated 15% annual returns is FAR better than a NAV ₹10 fund that generates 6%.
What matters: Returns, expense ratio, consistency of performance — NOT the NAV number.
NAV level means absolutely nothing by itself. A low NAV just means the fund is newer (started at ₹10). A high NAV means it's been running longer or has grown more.
A fund with NAV ₹500 that has generated 15% annual returns is FAR better than a NAV ₹10 fund that generates 6%.
What matters: Returns, expense ratio, consistency of performance — NOT the NAV number.
| Feature | Stock Price | Mutual Fund NAV |
|---|---|---|
| Updates | Real-time, every second | Once daily, after market close |
| High = Expensive? | Relatively yes | No — look at returns instead |
| Trading | During market hours only | Any time — executed at EOD NAV |
🎯 Today's Takeaway:
NAV = daily per-unit value of a mutual fund. Calculated after market close. Units = amount invested / NAV. High or low NAV = irrelevant. Judge funds by returns, expense ratio, and consistency. Tomorrow: SIP — the investment strategy that changed how India saves!
NAV = daily per-unit value of a mutual fund. Calculated after market close. Units = amount invested / NAV. High or low NAV = irrelevant. Judge funds by returns, expense ratio, and consistency. Tomorrow: SIP — the investment strategy that changed how India saves!