What Is The NAV Of A Mutual Fund?

What is NAV?

NAV represents the net value of all the assets of a particular scheme in the mutual fund. NAV alone does not quantify a fund. We have shares that are pried exuberantly and there are penny stocks. 

A stock priced lower than rupees ten with price to book value and P/E in fraction does not necessarily show the stock as extremely attractive. 

In fact, the stock earnings may be in a free-fall with no respite in sight and price may get even lower.

The NAV of the mutual fund is directly related to the assets it holds in form of stocks and bonds. 

The second factor is the number of assets. The number of assets here means the number of stocks or bonds that the fund has bought. 

This is important because NAV will depend on the market price of the total assets divided by the number of units of that asset that the fund owns.

Does Higher NAV translate to more costly Mutual Funds?

If a fund, say A, holds hundred stocks of MRF Ltd, each of whose value is nearly rupees sixty-two thousand, then the NAV will be nearly equal to six hundred and twenty for each unit of that mutual fund series. 

On another hand if another fund, say B, holds hundred units of CEAT Tyres Ltd whose unit value is about one –thousand rupees, then that fund’s NAV will be around rupees ten for each unit.

NAV of fund A is several times more than NAV B. However, that does not make fund A costly than fund B.  

When the Tyre industry’s stock price surges, fund A investors gets greater return benefits. This is because the sixty-thousand rupees stock will have much more capital gains than a one-thousand rupees share. 

The dividend payout from a rupees sixty thousand share, in normal cases, will also be much higher than rupees thousand script. Therefore, in reality, a high NAV does not really translate into it being costly.

Mutual Fund NAV Calculation
Mutual Fund NAV Calculation

Mutual Fund NAV Calculation

NAV is directly proportional to the book value of the assets for that fund. The market sets a stock price as per the current and future prospects of that company. 

However, the mutual fund does not set the stock price. Rather, it buys the stock directly at the current market price. Therefore, we say that the NAV is directly co-related with the market price of the stock.

Another factor apart from the market value of the underlying assets and the number of shares that the fund holds is the expense of the mutual fund. 

The mutual fund has many expenses. Examples are the regulatory costs, cost of transaction (which is mostly done in bulk), fees paid to the fund managers , the accounts party for determining the NAV at end of day and other teams of analysts for choosing the stocks, media advertisements, etc.

All the expenses borne by the fund are subtracted from the assets held. The net figure obtained each day divided by the outstanding units of the mutual fund gives the NAV.

Formulae of The NAV in words

Hence, to find the NAV of a mutual fund, the concerned team first inputs and adds all the assets. 

Examples of assets are market value summation of all the equities or bonds that it holds at the end of the day, the unrealized capital gains, receivables in maximum T+2 days for the scripts sold, any dividend income received that day, etc.

The team then subtracts all the liabilities for that fund on that day end from the assets. 

The liabilities include notional loss made on that day on open positions if any, money that has to be kept aside for stocks bought same day, different expenses native to the und as described above,  long and short term loans, etc.

This net total amount obtained by subtracting the net end-of-day liabilities from same day assets is termed as Net Asset Value or NAV.

This total NAV is now divided by the total outstanding number of mutual fund units that are in hands of investor or with the mutual fund ready for trade. These are also called shares issued by the fund house. 

This division gives us the NAV per unit of the mutual fund.

The net asset value of a company is also similarly defined as the total assets of that company minus its total liabilities divided by the equity shares outstanding or available for trade. 

Net Asset Value in Insurance

Net asset value is also used for insurance policies. NAV is mostly used for describing market value of ULIPs. 

In unit-linked policies, the investment amount is divided between premium for insurance and rest for investing in equities or bonds. 

The ratio of investment in insurance or equity or bonds is as per the specification of the fund. 

As we have seen in mutual funds, NAV of ULIP is also derived from its assets comprising units of stocks and debt papers of governments and other public companies and normal liabilities. 

One additional liability that differentiates it from other mutual funds is the money or liability that is paid or has to be paid to the unit holders for their insurance claims.

NAV for ETFs

In the case of ETFs, the NAV per unit of ETF is the price that the ETF makers have while creating the ETF. 

Common investors can also be ETF makers but need to have a large number of units of MF to be eligible. 

Intraday wise, the ELF makers also known as authorized participants who get arbitrage opportunities when the market value of the ETFs gets higher than the NAV. 

Then the ETF makers sell the units of ELF, which it had received from the fund house, in the exchange to the retail participants. It gets a higher value, as the price of Elf’s is higher than the underlying scripts, which are held by the fund house. 

Selling of ETFs held by the market maker for that fund means more supply than demand , which will bring the price of the ETFs down at the end of the day. 

This will lead to drop in NAV at the end of the day from the high market price during the market hours. 

Once the NAV drops the quantity of ETF units that were sold in secondary market is replenished in ETF makers from the fund house at lower price than sold. 

The normal retail investor cannot buy ETFs at NAV unless he buys from the fund house in relatively large specified quantities. 

If he buys in a smaller quantity, he will have to buy at market price. However, the advantage he has in buying ETFs as compared to mutual fund units, whose NAV may be comparatively lower than the market price of securities that it holds, is higher transparency. 

ETFs readily publish their holdings, expense ratio, and other parameters daily at the end of the day, while mutual publish these details only quarterly.

NAV differs from the market price because of the demand for that particular fund. When the demand for a particular mutual fund scheme is more, its NAV will not budge. 

However, demand for that fund will jack up the market price of the ETF corresponding to the fund, intraday wise. In case of regular mutual funds, the NAV changes only at the end of the day based on closing price of its underlying assets. 


Just like blue chip stocks, NAV of well-managed fund houses does not drop like a brick in a falling market.

Historical returns show that professionally, well-managed firms always perform better than the index they represent and provide spectacular results when the markets are in an uptrend.

It is better to buy a mutual fund, after checking the historical NAV performance, when the underlying stock prices are low.


How is NAV relevant to investors?

Ans. The importance of NAV is mainly in judging the fund performance. Historical NAV co-relation with the index it broadly represents gives investors an idea about the fund’s performance relative to the market. Along with, the dividend payout of the fund has to be taken into account.

What is Net Asset Value in the mutual fund and how Net asset value is calculated.

Ans. As conveyed by the word net, the net asset value of a fund is the net value of the fund left after subtracting all the liabilities of that fund from all total assets. Dividing this figure by all outstanding units of that fund gives its NAV per unit.

How to calculate the net asset value of a private company?

Ans. From which all liabilities long and short term, payables, future, and current  expenses, etc. have to be subtracted.

What are the net asset value formulae for a fund?

Ans. expenses / (outstanding units of the mutual fund).

How does investment timing affect the NAV?

Ans. Like market prices, it is best to invest when the market price of the underlying stocks are low, automatically the buyer will get the units at a lower NAV.

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Stockquantum was founded by Dharmendra Mukati in 2018. I am a Trader and Investor in the last 10 years. I am writing here about stock broker review, broker comparison, IPO investment, Crypto currencies, technical analysis, fundamental analysis, sub brokership, mutual fund, personal finance, and our experiences.