Don’t Ignore This Number: Understanding NAV in
Mutual Funds
Many
investors blindly invest in SIPs and mutual funds without understanding a basic
concept — NAV (Net Asset Value). It directly impacts how much of the
fund you own.
📊 What is NAV?
NAV =
(Total Value of Fund’s Assets – Liabilities) ÷ Total Units Issued
It’s like
the "per unit price" of a mutual fund.
Example: If NAV is ₹100 and you invest ₹1,000, you get 10 units.
📊 Common Misconceptions
❌ “Low NAV = Cheap Fund” → Wrong.
✅ NAV doesn’t decide performance — the underlying assets and returns
do.
📊 Why NAV is Important
- Determines how many units
you receive
- Affects your entry and exit
value
- Helps compare performance
with other funds
📊 Does Higher NAV Mean a Better Fund?
No! A
fund with ₹1 NAV can perform better than one with ₹500 NAV.
Focus on:
- Fund returns over 3+ years
- Expense ratio
- Fund manager’s reputation
- Benchmark comparison
🧠 Pro Tip
NAV only
matters at the point of transaction (buy/sell). For SIPs, averaging
happens — so NAV impact is reduced.
✅ Conclusion
Understand
NAV like you understand stock price. It’s not the only thing that matters — but
knowing it gives you smarter control over your investment.
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