How is NAV calculated for a mutual fund, and is it important?


Net Annual Value (NAV) is the market value of all the securities that the mutual fund scheme has invested in. NAV indicates the performance of mutual funds and is an important performance parameter for investors. If you are investing in a mutual fund scheme, the NAV at the time of purchase is the price you pay per unit of the scheme. In the case of a New Fund Offer, the scheme is generally launched at an offer price of Rs 10.


How is NAV calculated?

Mathematically, the formula for calculating NAV is,

(Total Assets – Total Liabilities)/Total number of units outstanding.

If you have invested Rs 1 lakh in a mutual fund scheme with a NAV of Rs 100, you will own 1,000 units of the scheme. As the market value of the Asset Under Management (AUM) increases, the NAV will increase. This increase in NAV will be your earning from the mutual fund investment.

All calculations are “as on date” basis, so the NAV may change every day. NAV cannot be the only criteria while purchasing units of mutual funds or selecting a SIP. This is because a lower NAV doesn’t mean an inferior mutual fund; it just means that the scheme and its AUM are still growing.

The Total Assets mentioned in the NAV formula include securities and liquid cash with the fund scheme. Securities include all types of investments made by the fund scheme like equity instruments, bonds, debentures, commercial papers, and other money market instruments. The NAV is calculated every day after market closing.

Why is it important?

For an investor, the timing of the purchase is important in the NAV of the units purchased. There is a 3 PM cut-off timing for all subscriptions and redemptions of mutual funds. If you make the payment and the bank receives it before 3 PM, you will receive units with the same day’s NAV. However, if the bank receives the fund after the 3 PM cut-off, your allotment will have the next day’s NAV – even if you paid to the AMC before 3 PM.

NAV is important to track the regular performance of the scheme. A newer mutual fund scheme would have a lower NAV, but if the NAV is improving fast, the scheme is recommended. However, for the long-term performance of the scheme, the historical return is a better criterion. In other words, NAV cannot be the only parameter for the selection of mutual funds.


With Tata Capital Moneyfy App, you can regularly track your SIP’s NAV changes and manage your investments better. Similarly, if you are planning to invest in a new SIP, you will find all the necessary information and analysis on hundreds of mutual funds in the Tata Capital Moneyfy App.