What is Net Asset Value, Types, Formula and its Roles

When you start exploring investments, mutual funds often come up as one of the most popular options. A key concept to understand here is NAV (Net Asset Value). NAV represents the per-unit value of a mutual fund scheme. It tells you how much each unit of the fund is worth on a given day. 

For example, if you invest in an Equity Linked Savings Scheme (ELSS), its NAV is what determines the per-unit cost of your investment. ELSS funds are regulated by SEBI and fund houses must follow AMFI guidelines, ensuring investor protection. 

Knowing the NAV formula and how it works helps you track your investment better and make smarter financial decisions. 

What is NAV in Mutual Funds? 

Simply put, NAV in mutual funds is the market value per unit of the scheme. It is calculated by dividing the total value of the fund’s assets (after subtracting liabilities) by the number of outstanding units. 

Formula: 
NAV = (Assets – Liabilities) ÷ Number of Outstanding Units 

This is known as the nav formula in mutual fund terms, and it’s the same across fund types. 

• Daily NAV Calculation: NAV of ELSS funds is updated every day after the stock market closes at 3:30 pm, reflecting the day’s portfolio value. 

• Open-ended vs Close-ended funds: Fund houses declare NAV daily for open-ended schemes, while close-ended funds may share NAV weekly or monthly. 

• Misconception Alert: A lower NAV doesn’t mean the fund is cheaper or will give better returns. What really matters is the scheme’s portfolio quality and historical performance. 

Mutual Fund NAV Calculation: Assets & Liabilities 

The mutual fund nav calculation process involves two components: 

1. Assets 

Assets include everything the fund owns. This could be: 

• Equity shares (stocks) 

• Bonds, debentures and government securities 

• Money market instruments 

• Cash and cash equivalents 

• Accrued income (like dividends and interest receivable) 

2. Liabilities 

Liabilities are the obligations the fund has to meet. These could be: 

• Management and operating expenses (expense ratio) 

• Payables such as outstanding payments, audit fees, etc. 

• Borrowings, if any 

• Any accrued charges or liabilities 

When you subtract the total liabilities from the total assets and divide the result by the number of units, you get the mutual fund NAV calculation. 

So, if you’ve ever wondered how to calculate NAV of mutual fund, the process is simple: check the fund’s assets and liabilities, apply the formula and divide by units. 

Role of NAV in the Performance of a Fund 

NAV isn’t just a number—it helps you understand a scheme’s progress and can influence your investment decisions. Here’s why NAV matters: 

• Performance Indicator: Growth in NAV reflects the appreciation of the scheme’s assets 

• Helps in Valuation: NAV gives you a sense of how the scheme is doing compared to others in its category 

• Entry & Exit Decisions: Investors can decide when to buy or redeem units based on NAV trends 

• Transparency: Since NAV is declared regularly, you can track your investments clearly 

• Regulated Benchmark: Declared under SEBI and AMFI rules, NAV ensures consistency and fairness 

Why is NAV in Mutual Funds Important for Investors? 

As an investor, NAV helps you: 

• Understand the current value of your holdings 

• Track the growth of your investments over time 

• Calculate redemption value when you sell units 

• Make informed investment choices based on fund performance 

Remember, how to calculate NAV is important, but what’s even more important is observing its growth trend over time. 

Quick Example 

Imagine a mutual fund with: 

• Assets worth ₹100 crore 

• Liabilities worth ₹5 crore 

• Outstanding units: ₹10 crore 

NAV = (100 – 5) ÷ 10 = ₹9.5 per unit 

This is the price you pay to buy a unit or the amount you receive when redeeming one. 

Final Thoughts 

Understanding NAV, the nav formula in mutual fund, and its calculation gives you clarity about your investment’s worth. However, don’t make decisions based on NAV alone—consider the scheme’s returns, expense ratio, fund manager’s track record, and your financial goals. 

And here’s the best part — if you need liquidity, you can get instant cash up to ₹10 lakhs against your mutual fund portfolio with Fibe. You continue to grow your investments while meeting your financial needs. 

Download the Fibe App today and explore Loan Against Mutual Funds to make the most of your portfolio. 

FAQs on NAV in Mutual Funds 

1. Can the NAV of a mutual fund go negative? 

No, NAV cannot go negative. It may rise or fall with market volatility, but since NAV = (Assets – Liabilities) ÷ Outstanding Units, the result will always remain non-negative. 

2. How can I check the NAV of a mutual fund? 

 You can check NAV in two simple ways: 

• Visit the official AMC website of your fund 

• Check the AMFI NAV history page for daily updates