What is Mutual Fund NAV? How is it calculated? | Should you avoid Funds with Higher NAVs?

We often get to hear a term called ‘net-worth’. What does it mean? – It means the value of everything you own (Assets) minus all your debts/liabilities.

For example : You own a commercial complex of Rs 1 cr and you have a taken a home loan of Rs 25 Lakh, in this case your net-worth is Rs 75 Lakh.

The concept of Mutual Fund NAV (Net Asset Value) is very similar to Networth. When you invest in mutual funds you are allotted certain units of that scheme. If you invest say Rs 10,000 in a scheme, you will receive units worth Rs 10,000. Now, how does the fund figure out how many units to allot to you?

This is where, NAV comes into picture! You get the units based on NAV of the fund. . NAV is the per-unit value or per-unit price of a particular mutual fund scheme.

For example : Let’s say you would like to invest Rs 10,000 in HDFC Balanced Fund (Growth-Direct plan). The NAV of this fund as on 7th July, 2017 was Rs 145.536 per unit.NAV net asset value of a fund hdfc balanced fund pic

So, you would get around 68 units for your investment of Rs 10,000.

What is Mutual Fund NAV ? How is it calculated?

Mutual funds invest the money collected from investors in securities markets. These securities can be Stocks, Bonds, Company Fixed Deposits, Futures & Options etc., They invest the corpus based on a scheme’s investment objective and type of a scheme. So, an Equity fund primarily invests in Stocks and the same way a debt fund invests primarily in portfolio of debt securities.

To make these investments, the fund houses do incur some expenses and also have to bear some liabilities. Hence, the NAV of a mutual fund scheme is the total value of its holdings net of admissible expenses.

And the NAV per unit is determined by dividing the NAV by the number of units held by investors.

In simple terms, NAV = (Assets – Debts) / (Number of outstanding units)

The Assets of a Mutual Fund Scheme can be ;

  • Market value of MF Scheme investments (Shares, Bonds etc.,) (The market value of the stocks & debentures is usually the closing price on the stock exchange where these are listed.)
  • Cash
  • Any receivables & liquid assets
  • Accrued Dividends (on stocks) & interest income (on debt securities) etc.,

Debts can be ; (Kindly note that here Debts does not mean the debt investments, but these are liabilities that a scheme owes.)

  • Liabilities
  • Scheme related Expenses which are accrued (typically referred to as ‘Expense Ratio’.)

All Mutual Funds​​​ are required to publish their NAV at every business day as per SEBI guidelines.

Why is NAV useful?

As discussed above, the NAV primarily reflects the value of the securities in the portfolio. It is influenced by the market price of the securities in the portfolio.  Based on the change in NAV over a period of time will let you know whether you have a loss or gain on your investment.

So, do you need to invest in a mutual fund scheme based on NAV figure?

NAV & Misconception

Mutual Fund Schemes NAV Net Asset Value Misconceptions

The major misconception that many of us have is – a higher NAV means that a particular scheme is more expensive than a fund with lower NAV. A higher NAV fund means you get lesser number of units, hence low profits.

This is wrong! You should not short list a mutual fund scheme based on NAV figure.

The NAV is just a number and when you are short listing MF schemes, you need to compare their performances (Returns) and not the NAVs. It is the value of your investment which is more important than the number of units held by you.Mutual Fund NAV High NAV Vs Low NAV which is better Example pic

For example : In the above table, if you notice that the NAV of ICICI Pru Balanced fund is lower than NAV of HDFC Balanced Fund’s. The general perception is lower NAV is good and gains can be more. If you look at the performance of these schemes, HDFC Balanced fund has given better returns than ICICI Balanced fund, though its NAV was comparatively high at the time of investment.


  • Is NAV calculated after adjusting for Expense Ratio? – Yes. NAV is obtained after subtracting the expense ratio of a fund. This expense ratio is the total of all expenses made by the mutual fund annually. The list of expenses can be like ; operating expenses, management fees, distribution and marketing fees, transfer agent fees, custodian fees. audit fees etc.,
  • Why does NAV of a Regular Plan and Direct plan of the same scheme differ? Mutual Fund Schemes NAV Net Asset Value Misconceptions Direct Mutual Fund Plan Regular PlanDirect mutual funds plans are those where AMC / Mutual Fund Houses do not charge distributor expenses / trail fees / transaction charges. When you invest in a mutual fund’s direct plan, you deal with the AMC directly, while in a regular plan you invest through a distributor or advisor. Direct mutual fund schemes have lower Expense Ratio than that of Regular plans. This is the main reason why the NAV of a direct plan will be higher than the NAV of a regular plan of the same scheme. (Related Article : ‘MF Direct Plans Vs Regular Plans – Returns Comparison‘)
  • What happens to NAV when a scheme declares dividend?  The NAV of a mutual fund scheme comes down to the extent of amount of dividend paid out. Generally, this fall in NAV is very precise in case of Equity mutual funds. For example, if a fund has NAV of R 60 and declares Rs 2 dividend, the fund will have to sell portfolio holdings amounting to Rs 2 in the market and pay this out as dividend. The NAV will get reduced by this sum and become Rs 58.
  • Will I get same day NAV price for my investment? Are there any cut-off timings? – Kindly note that that there are no cut-off timings for making mutual fund investments. However, cut-off timings do exist to determine the applicability of NAV. The allotment of NAV depends on the time you submit your application and money with the fund house. If you invest before cut-off time, you get same day NAVs on Equity Funds. The cut-off time for Equity funds is 3 p.m. The cut-off time for Liquid funds is 2 p.m. If you invest before this cut-off time, you get previous day’s NAV.
  • Do mutual funds also receive Dividends on Shares? – Yes. Mutual Fund schemes that own shares/ stocks in their portfolios will receive Dividends (if any).
  • How frequently NAVs of mutual fund schemes are declared? – Mutual Fund Schemes NAVs are declared on daily basis. They are usually declared after the closing hours of the Exchange(s).
  • What is the impact of Exit Load (if any) on NAV?  At the time of mutual fund redemption, the amount you get will be present NAV minus the exit load, if any. (The exit load is charged only if you redeem your units before a defined period.)
  • Can NAV per unit rounded off? As per SEBI’s guidelines, to ensure uniformity, mutual funds can round off Net Asset Value up to four decimal places for index funds / debt funds and up to two decimal places for all equity-oriented and balanced schemes. (However, mutual funds have the freedom to round off the NAVs up to more than two decimals places in the case of equity-oriented and balanced schemes.)

Continue reading :

(Kindly note that Mutual Funds are subject to market risks and past performance may or may not be repeated.)

(Featured Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (References : moneycontrol.com & valueresearchonline.com) (Post first published on : 10-July-2017)

  • Ganesh says:

    i want to invest lumpsum 20k in mf for 3 yrs. which will be best for returns after 3 yrs.
    Aslo want to start SIP of 500 rs for 15 yrs. Kindly suggest the schemes.

  • Aditti says:

    Very good article. Net Asset Value (NAV) is the total asset value per unit of the fund. The Asset Management Company calculates NAV at the end of every business day. Net asset value reflects the realisable value that the investor will get for each unit if the scheme is liquidated on that date.

  • xavier ghorkana says:

    Thanks you so much for such lucid explanation

  • Vivekanand says:

    Hi Sree
    Have been your avid follower. Here’s my question needing your suggestion.

    I have invested 45 lacs in Liquid/Debt funds over the last 6 months from which I had started to do STP to Equity/Balanced funds. I had not invested the amount directly in Equity funds as i will be redeeming 90% of the money invested within the next 4 months to purchase a flat (costing about 40 lacs).
    I also have 32 Lacs unutilized funds right now which I want to invest in some 5-6 good mutual funds for atleast 4-5 yrs.
    1. What are some of the good funds that I can invest this 32 lacs in? I’m looking for High performing funds which will yield yearly returns of Rs.45000 from year 3 onwards. And there are no other financial goals I have apart from the above situation.My risk appetite is average.
    2. Can I invest say 5 Lacs in say 6 Funds in one shot? is it advisable to do this considering that the NAV may be at peak for some funds? Or whats the other way to distribute and invest 5 Lacs in 6 funds max?


    • Dear Vivekanand,
      Thank you for being a loyal blog reader!

      You mean to say that your investment of Rs 45 lakh has a time-frame of around 4 months only??

      1 – If your time-frame is around 5 years, you may set up STPs to Equity oriented balanced funds (for Rs 32 Lakh). You may then set up SWP (Systematic Withdrawal plan) from this corpus when required.
      2 – May I know your investment objective and time-frame for this? (Rs 5 lakh).
      Suggested readings :
      Best Balanced funds
      How to pick right mutual fund schemes?
      MF portfolio overlap analysis tools
      What is 200 Day moving average?

      • Vivekanand says:

        Hi Sree… Let me clarify.
        The 45 Lacs was already invested in Liquid funds 6 months back. I need those funds shortly (in another 3-4 months) for house purchase. So yes the total time frame this 45 L was invested would be 10 months only max.

        1. However i want my current cash in Hand of Rs.32Lacs to be invested for long term. 5 yrs as you suggested.
        2. And by 5 lacs, what i meant is 5 Lacs * 6 funds (amounting to approx 32 Lacs as mentioned in point 1). Instead of doing an STP , can I directly split this 32 Lacs into 5-6 Balanced funds / good MFs that you suggested?

        • Dear Vivekanand,
          Ok. 10 months time-frame for equity oriented MFs can be very risky and I assume you have accounted for the possible risk factors!

          1 & 2 – Considering the current market state, your time-frame and risk profile, may be STP would be a better choice to lump sum investment.
          You may pick couple of balanced funds and one Large cap fund.

  • Vineet Jain says:

    Hello Sreekanth

    How is dividend calculated for a mutual fund?
    Are dividends based on the face value of a mutual fund or is it based on the NAV value of a mutual fund?
    If some MFs dividends are based on face value and some on NAV then how do we identify these funds or separate out these funds from each other?

    • Dear Vineet,
      Dividend is paid out based on the NAV figure.
      For example, if a fund has NAV of R 60 and declares Rs 2 dividend, the fund will have to sell portfolio holdings amounting to Rs 2 in the market and pay this out as dividend. The NAV will get reduced by this sum and become Rs 58.
      This Rs 2 is per unit.

  • Manoj patil says:

    Hello srikhant sir,
    Why mutual fund companies are not giving bonus units to the investors?
    As bonus shares are given to the investors in equity markets similar to this why not mutual fund companies are not giving to the investors?


    • Dear Manoj,
      The dividend income or bonus shares received etc by the MFs are factored in the NAV of the schemes.

      • Krishna says:

        Hi Sreekanth,

        I’m a regular follower of your blog…many thanks for your insights on financial planning, appreciate your work.

        I’ve a question on NAV of mutual fund, if i’m going to invest 10,000 rupees on HDFC balanced fund and suppose the NAV is 100 rupees at the time of purchase, i should be allotted 100 units.

        Will the fund house go and purchase 100 units worth of shares out in the market to add to the portfolio assets before they allot me the units? How’s it that fund house can issue more units? Is there a cap on how much units the fund house can issue?

        Thanks in advance for your reply.


        • Dear Krishna,
          Thank you being a loyal reader and for your appreciation!

          The amount invested by the investors is allocated to fund portfolio based on its investment objective. The funds do maintain some Cash in hand and may not invest the total amount in the market. The fund just allocates the units based on your quantum of investment and the applicable NAV.
          The fund may or may not invest the entire amount in the market. The schemes can be debt oriented also.
          The fund houses have to adjust / account for lot of expenses also.

  • Rahul Phodkar says:

    i’m new new in Mutual fund investment, i have chosen the below fund
    1. reliance mid & small cap fund (G)
    2. Kotak select Focus Fund (G)
    3. L&T emerging Business Fund (G)
    4. Mirae Asset emerging blue chip fund (G)
    5. SBI bluechip fund (G) for 36 month. Please guide me if anything need to be changed and also let me know about small cap fund which can more beneficial to achieve my goal.

  • S.N.SINGH says:

    Thanks for yr prompt reply. would it be fair to invest say 50 lakhs , 25 l each in hdfc balance fund and birla sunlife balanced 95 fund both growth-direct or any other suggested by you with SWP after 12 months. Again whether lumpsum or liquid to balance ( say in 18 months with STP) type investment would be better. Kly suggest good liquid fund schemes with STP for short duration. I would also like to know the IT payable on it( liquid fund). whether it would be short term capital gain only ( say 1.5 l *18 months=24l) and in that case ITR -I Saral can’t be used.

    kind regards


    • Dear Mr SINGH,
      Equity oriented balanced funds are a good choice but kindly do note that they have MODERATE risk profile.
      STPs are treated as normal redemptions and taxes on Capital gains (if any) are applicable. Yes, you may have to file ITR 2 in that case.
      Kindly read :
      Mutual fund taxation rules
      Which ITR form to file?

      Ex : HDFC Liquid fund ->STP-> HDFC Balanced fund
      Birla Cash Plus -> STP -> Birla Balanced fund ’95.

  • S.N.SINGH says:

    I am working in a Public sector co. due to retire on Sept 30, 2017. I am likely to get approx. 75to 80 lakhs from PF and gratuity. Apart from investing 15 l in sr citizen scheme and 7.5 l in LIC ( recently launched), I will have approx 60 l for investment. The return from these investments and employee pension scheme will be apprx 20,000/ month.I will need around 20, 000/ more per month say after ( after 12 to 18 months from investment). I hv mediclaim policy by company ( flotter 5 lakhs jointly). would be grateful if u could suggest investment schemes suiting my requirement.

    I also want to invest say 5 lakhs for 20 yrs for my granddaughter ( 2 yrs old). kly suggest some good investment plan.

  • D C AHUJA says:

    Sir I want to invest in reliance mutual funds.Kindly suggest schemes here as I want to keep money in its differant funds.

    • Dear AHUJA ..May I know your investment time-frame? and why Reliance AMC schemes only?

      • D C AHUJA says:

        Thanks for reply.I am totally new for mutual funds.In fact no special reason for reliance only by chance I while looking on line got immidiate account and started.I have to time frame and want money at any time if returns are not satisfactory.Invested in lumpsum.Rs 30000 in Gold saving fund and 15000 in liquid fund.Target is about rs 100000 but if result good then may increase.Your article is very good but your personal suggestion will be more usefull and am waiting for….

  • thomas says:

    hi sreekanth ,

    1 )some of diversified funds like icici pru value discovery which is in my portflio is not performing well recently (bottom quartile now”..
    Can you pls point to a couple of very consistent and best diversified funds for me to consider reinvesting ..
    (i have tata p/e as well , but seems birla advantage , sbi magnum multicap , some franklin funds etc seems to be more consistent in diversified funds )..your thoughts on this would be highly appreciated .

    2) also one of my balanced fund in portfolio tata balanced also is not performing well..i had opted for 5 years sip monthly , so what is the process of stopping the SIP in between (as it goes automatically from my bank a/c) ..do i need to contact multual fund house or the bank or both ?


    • Dear thomas,
      It is still one of the consistent performing funds (over 5-10 year period) though it is not up to its mark offlate. I believe no fund will remain in the top quartile of performance forever, advisable not to churn portfolio frequently.
      If you are really disappointed with its performance, you may hold on to existing units and switch the future SIPs/investments to other diversified fund.)
      Kindly read my latest review on Balanced funds.
      You have to submit SIP cancellation form to the fund house.

  • Naresh Choudhary says:

    Hi Sree,

    Hope you are doing well. I invested in a fund as SIP. My SIP started from Jan 2012 till October 2016. Total units I have in this fund are 1500. This fund has an exit load on 1% when you switch/redeem before 1 year. What will happen if I redeem 1200 units(all units before Jun 2016) today, will I be charged exit load? Can you please let me know how exactly exit load works on different scenario?

    Many thanks in advance!

  • Subham says:

    Dear Sir, My mom is a widow taking family pension of my central govt. employee deceased father. She also has one FD which was created using the one-time arrears received. She never bothered about TDS/ITR. This year I got to know that TDS is deducted on her FD income by seeing 26AS form. I want to file ITR for her.
    I heard that family pension to be shown in ‘income from other sources’. Is this true?

    I also got this from internet- “In the case of income in the nature of family pension, a deduction of a sum equal to thirty three and one third per cent of such income or fifteen thousand rupees, whichever is less.”

    Say her yearly pension income is 120000, and FD income is 9000 and savings interest is 1000. Will her income to show in ‘income from other sources’ be (120000-15000)+9000+1000 = 115000? Or this 15000 is to be shown in some other section separately? Please clarify sir.

    She has medical contribution of 1500 deducted from her January pension. I think she can have deduction of 1500 in section 80D and for Saving’s interest part (Rs 1000) in 80TTA. Any more deductions she can have?

    Sir I’m a close follower of your blog for quite a long time.

    • Dear Subham,
      1 – Yes, it has to be shown under the head ‘income from other sources’.
      2 – Rs 15,000 is a standard deduction, so you can deduct from Rs 1,20,000 and disclose the remaining balance along with other interest income under the head ‘income from other sources’.
      Kindly read :
      List of important tax exemptions

  • Saurabh says:

    dear Sreekanth,

    so my query given you idea for next blog 🙂

    anyways, nice article.


  • BR says:

    Hi Sreekanth,

    Good day

    I’m 35 years old & have started a SIP of 50K in 4 mutual funds from past 8 months. My goal is to generate 1.5 cr for my daughters education, marriage & for my retirement savings.( tenure is 15 years for all funds) At present the funds are returning 15%+ returns. whether I can sell all the funds & restart the SIP or shall I hold till my goal period?

    pls suggest


  • RAJ says:

    Dear Sreekanth,

    very nice information. Very good article. All doubts cleared for me.


  • BG mahesh says:

    Good information

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