Let’s break it down – NAV stands for Net Asset Value. You can think of it as the “price” of one unit of a mutual fund. Just like you check the price of a product before buying it, investors check the NAV before investing in a mutual fund.
But remember, a higher or lower NAV doesn’t mean the fund is better or worse. It’s just a number that reflects the current value of the fund’s investments after removing expenses.
How is NAV Calculated?
At the end of each day, the value of the mutual fund is updated based on how its investments are doing, after taking out any necessary costs.
That’s what you get: the NAV per unit.
Does NAV Tell You How the Fund is Doing?
Yes and no.
It can show how the fund has moved over time. For example, if a fund started with an NAV of 10 and now it has grown over the years, that’s a good sign.
But you cannot compare two funds just by their NAVs. One might have a NAV of 100 and the other just 10 but that doesn’t mean the one with 100 is better. What matters is how much they grow after you invest.
When Do You Get the NAV?
This part is essential; the NAV you get depends on when your money reaches the mutual fund company.
Let’s say you place an order to buy mutual fund units today. But unless it reaches the mutual fund house and the amount gets realised in their account before the cutoff time, you won’t get that day’s NAV.
So, timing matters a little, especially for short-term investors.
NAV and SIPs
If you invest every month through an SIP, the number of units you get will depend on the NAV of that day. If NAV is lower, you get more units. If NAV is higher, you get fewer. Your cost averages out over time, which is one of the most significant benefits of SIPs.
So, What Should You Focus On?
I don’t think the NAV number is what you should focus on.
Instead, focus on:
- How the fund has performed over the long term
- Whether it matches your investment goals
- The consistency of the fund’s past performance and how well it has managed through different market conditions
The NAV is just a way to track value. What matters is how well the fund grows your money over time.
Quick Takeaway?
A low NAV isn’t cheap, and a high NAV isn’t expensive. It’s not about its price, it’s about its performance. Look for consistency, long-term returns, and whether the fund suits your needs.
Ultimately, investing is more about staying patient than picking the “right” NAV.”
