One of the most common questions when investing in mutual funds is about Net Asset Value (NAV).  Since the stock market fluctuates daily, the NAV of a mutual fund also changes. Many investors assume that a mutual fund with a low NAV mutual fund is a better deal, while others think a highest NAV mutual fund means better returns.

But is that really true? Let’s know it in simple terms.

What is NAV in Mutual Funds?

NAV or Net Asset Value represents the price at which you buy or sell mutual fund units. It is calculated daily based on the total value of the fund’s assets minus its liabilities, divided by the number of units.

The mathematical formula for NAV is:

NAV = (Total Assets – Total Liabilities) / Total Units Outstanding

Does a Low NAV Mean a Better Investment?

Many new investors believe that funds with a low NAV mutual fund are cheaper and will provide better returns. However, this is a myth. The NAV only tells you the current price of a single unit of the mutual fund. It does not predict how the fund will grow in the future.

A fund with a low NAV mutual fund may look attractive because the entry price appears lower. Regardless, what truly matters is the fund’s performance, portfolio quality and the expertise of the fund manager. Factors like past returns, risk management and asset allocation play a much bigger role in deciding whether a fund is a good investment.

Does a High NAV Mean Better Returns?

On the other hand, some investors avoid mutual funds with high NAVs, assuming they are too expensive. But NAV alone does not determine a fund’s potential. The highest NAV mutual fund has often been in the market for a long time and has grown in value over the years.

For example, if 2 funds have identical portfolios and performance histories but one has an NAV of ₹50 and the other ₹500, the percentage returns for investors in both will be the same. 

The key is to look at performance metrics like risk-adjusted returns, consistency and alignment with your financial goals instead of just focusing on NAV.

Should You Invest in a Low NAV Mutual Fund?

Investing in mutual funds should always align with your financial goals rather than focusing solely on NAV. It does not determine its success alone. Many investors look for a low NAV mutual funds list, assuming they are getting a better deal. But this approach can be misleading. 

Instead of picking funds based on NAV, you can consider the below factors:

• Past performance and consistency
• Fund manager’s experience and track record
• Expense ratio (lower is better)
• Investment strategy and asset allocation

When choosing a mutual fund, don’t just look at NAV—focus on the fund’s overall performance, cost structure and how well it fits your investment goals. A low NAV mutual fund doesn’t mean a fund is undervalued and a high NAV doesn’t mean it’s too expensive. 

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FAQs on Low or High NAV

Does NAV matter in index funds?

Index funds depend on net asset value (NAV) data for investors to track their total worth and investment results. You must consider factors apart from net asset value (NAV) when making investment choices. 

Does a high NAV mean higher taxes on my returns?

No, the taxes are not based on NAV. They are based on capital gains. Your tax liability depends on how much the NAV increases from when you invest to when you sell.

Should I invest in a new mutual fund with a low NAV?

Investing in a new mutual fund with a low NAV is not necessary. A fund’s performance, investment strategy and consistency matter more than its NAV. Always research before investing.