What Is NAV — And What It Does Not Tell You

Take the market value of everything the scheme owns on that day. Subtract what it owes, including accrued expenses. Divide by the number of units outstanding. That figure is the NAV.

Because it is a division by units, the number itself carries no information about quality. If the scheme issues more units by taking in new money, the pool grows in the same proportion, so the NAV does not move for that reason alone.

It moves for one reason: the value of what the scheme holds changed. That is why NAV is a result rather than a price, and why nobody sets it.

Unlike a share price, a NAV is declared once each business day, after markets close and the scheme values its holdings. There is no live figure moving through the day.

Which means the NAV you see quoted is yesterday\'s or today\'s declared figure, and the one that applies to your transaction is decided by timing rules rather than by what you saw when you clicked.

Exchange traded funds work differently, since they also trade on an exchange through the day at a price that can differ slightly from the underlying value. Our page comparing ETFs and index funds covers that distinction.

This is the practical part, and it catches people who transfer money in the evening expecting that day\'s figure.

Each scheme has a cut-off time. A valid request received before it is generally processed at that business day\'s NAV; after it, at the next business day\'s. For larger purchases, allotment also depends on the funds actually reaching the fund house, which is why a transfer initiated late on a Friday behaves differently from what you might expect.

None of this is an error when it happens, and none of it is worth optimising. Over any horizon that justifies investing at all, a one-day difference in NAV is noise. Our page on investing a lump sum sets out the mechanics for larger amounts.

Somebody compares a scheme at ₹12 with one at ₹480 and concludes the first is cheaper with more room to grow. It is the most common misreading in the subject and it is simply wrong.

Your money divided by the NAV gives you units. A lower NAV buys more units of a smaller thing. If both schemes rise ten percent, both holdings are worth exactly the same. The unit count differs; what you own does not.

The NAV level mostly reflects how long the scheme has existed and where it started. A fund launched in 2005 has had twenty years for its NAV to move. That tells you its age, not its quality, and our guide on why a low NAV is not cheaper works through the arithmetic with numbers.

The same misreading is what makes a new fund offer at ₹10 look like a discount, which our page on new fund offers deals with.

Two share prices can be compared because both refer to a claim on one company, and the market is pricing the same kind of thing in each case. Two NAVs cannot, because each refers to a different pool holding different assets in different proportions.

There is no sense in which a scheme at 250 rupees is halfway to one at 500. They are not on the same scale, and there is no scale they could be placed on, because the denominator in each case is a unit count that each fund house set arbitrarily at launch.

The only comparison a NAV supports is against itself over time, and even that is more usefully expressed as a return over a stated period than as two numbers side by side.

If NAV is a division sum, three other numbers are worth more of your attention.

• Your holding value, which is units multiplied by NAV. That is the only figure that answers what you own.
• XIRR rather than absolute return, since a SIP has money invested for different lengths of time. Our XIRR calculator works it out from your actual dates.
• The expense ratio, the one cost knowable in advance, explained on our page about the expense ratio.

And when a scheme pays out under the income distribution option, the NAV falls by roughly the amount paid. That is not a loss; it is your own holding being returned to you, which surprises people every single time.

One more practical point. NAVs are published by the fund houses and by AMFI, so you can look up the applicable figure independently rather than relying on whatever an app displays. That matters occasionally when a value looks wrong, and it is one more thing that does not depend on trusting an intermediary.

If you would like somebody to go through what you hold and what it is actually worth, get in touch.