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What is Mutual Fund NAV and How it is calculated?

What is NAV?

NAV stands for ‘Net Asset Value.’ NAV represents the price at which a mutual fund may be bought by an investor or sold back to a fund house. A mutual fund’s NAV is an indicator of its market value. Therefore, NAV can be viewed to assess the current performance of a mutual fund. By determining the percentage increase or decrease in the NAV of a mutual fund, an investor can calculate the increase or decrease in its value over time. A mutual fund’s NAV is usually calculated by a fund accounting firm hired by the mutual fund or the mutual fund house itself. It is mandatory, as per SEBI guidelines, that all mutual funds publicly display their NAV by updating it on the AMC & AMFI website on every business day.

How is NAV calculated?

Typically, a mutual fund asset falls into one of two categories. It is either a scheme with underlying securities or liquid funds (cash). Securities are inclusive of both stocks and bonds. To calculate NAV, the overall expense ratio is subtracted from the asset value. To standardize the value of assets to every unit, this value is then divided by the total number of outstanding units to yield the net asset value. Before we learn the formula for calculating NAV, we must understand what total asset value and expense ratio are.

The total asset value is different from the net asset value of a mutual fund. Total asset value includes its cash, stocks, and bonds, all of which are taken at market value, or the closing price of the mutual fund. All of the interest accrued from the fund, its liquid assets, and dividends are also included in total asset value. Finally, expenditures like any expenses, outstanding debt to creditors, and other liabilities are also part of the total asset value.

There are a host of expenses involved in a mutual fund. The expense ratio, which is subtracted from the total asset value to calculate NAV, is the summation of all yearly expenses made by the mutual fund scheme. The expense ratio includes it’s management charges, operating costs, transfer agent costs, custodian and audit charges, and distribution and marketing expenses.

The formula used to calculate a mutual fund’s NAV is:

Net Asset Value = [Total Asset Value— Expense Ratio] / Number of Outstanding units

Where ‘Total Asset Value’ is the market value of the investments of the mutual fund (latest closing price on the relevant stock exchange) in addition to any accrued income and receivables less accrued expenses, outstanding debt to creditors and other liabilities.


When is NAV Calculated?

A mutual fund’s NAV cannot be calculated during stock market hours as the underlying security’s price changes constantly. Once the closing bell resounds and the trading day is over, then NAV can be calculated. It is calculated using the closing prices of the fund’s securities for that day.

What does a high or low mutual fund's NAV indicate?

A higher NAV indicates you can buy fewer units for the same price than you can buy from a scheme with a lower NAV. As an illustrative example, let’s assume an investor chooses to invest ₹1,00,000 in two separate schemes A and B. Scheme A has a net asset value of ₹10, while scheme B has a NAV of ₹50, and both schemes return 10% per month. Though Scheme A appears cheaper as 10,000 units can be acquired while only 2000 of scheme B’s units can be acquired for the same price,but it’s not the case. Let’s see how.

Every month, due to the 10% return, the NAV increases. Next month, A’s NAV is ₹11 and B’s is ₹55. In both cases, the value of your ₹1,00,000 investment has grown to ₹1,10,000 in one month. Hence, high or low NAV is not related to the returns you can generate from a mutual fund scheme. As long as the schemes deliver the same returns the difference in their NAV is not significant. The difference between schemes A and B is that the investor gets more units in the first case than in the latter case.

Helpful Information for Mutual Fund Investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under ‘Intermediaries/ Market Infrastructure Institutions’. For redressal of your complaints, you may please visit For more info on KYC, change in various details & redressal of complaints, visit

This is an investor education and awareness initiative by Nippon India Mutual Fund.

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