Everything You Wanted to Know About Mutual Fund NAV is Explained Here

The uptrend of inflation, coupled with the uncertainties of life make one think seriously of the ways by which they can secure themselves against such circumstances. When you start thinking about that, you begin to cut down on your daily expenditure to save for the future. But that’s not gonna help you a great deal. Yes, you heard it right! It’s about investing the money at the right place to get the right result.

mf nav

The investment is greatly dictated by the financial goals you may have. So, if you want to make your daughter’s marriage a memorable one or require a huge surplus money to let your child get the degree from prestigious educational institutions, mutual funds can be a messiah to achieve such goals in many ways.

Mutual funds can be described as a pool of money collected from investors of different classes. The collected money is invested in equities, bonds, money-market instruments and other securities by the fund managers, who are hired by the Asset Management Company (AMC), to diversify the risk element pertaining to your investment.

Like the variation in stock price on a daily basis, mutual fund prices also change that way. There is a specific term to a mutual fund price, and which is Net Asset Value (NAV). It indicates the price at which the fund units can be bought and sold on the date of the instance. Let’s have a complete study of the mutual fund NAV here.

What is NAV of a Mutual Fund?

The NAV is the figure that arrives after deducting the liabilities from the assets of a fund. While assets mean the market value of investments as well as other assets like unamortized expenses, the liabilities consist of registrar fee, custodian fee, marketing fee, operating expenses, distributor commission and others. You can check out the formula below to calculate the NAV of a fund.


        Number of outstanding units on a particular day

Due to the dynamism of mutual funds, the NAV keeps changing during the trading hours due to the constant change in the underlying holdings such as stocks. In the case of open-ended funds, NAV doesn’t actually mean overpricing or underpricing of the scheme. The higher NAV of a fund does not mean it is expensive compared to the one with a lower NAV. So, what’s that balances things out for the mutual fund investors at the times of variation in NAV? Any guesses, folks? No! It’s the rupee-cost averaging factor that allays these concerns. In the event of falling NAV, the scheme buys more units and fewer units when the prices go up. In this way, the average cost of the investment reduces over time.

Use of NAV in Return Calculation of MF Scheme

The return of a mutual fund scheme is contingent on the existing, previous or historical NAV. The formula for the same is shown below.

Return=Existing NAV-Previous or historical NAV x 100

            Previous or historical NAV

Assume Existing NAV and previous NAV equal to ₹30 and ₹24, respectively.

Return=30-24 x 100



This is not the end of the calculation as it also takes into consideration the days, months and years. The formula will get further revised to the following ways-

Existing NAV-Previous or Historical NAV x 100 x 365

Previous or Historical NAV x number of days

Existing NAV-Previous or Historical NAV x 100 x 12

Previous or Historical NAV x number of months

Existing NAV-Previous or Historical NAV x 100 x 1

Previous or Historical NAV x number of years

Now if the investment period remains 300 in days, 7 in months, or 6 in years, what would be the return in all these circumstances?

Return As Per Day Formula

30-24 x 100 x 365


=30.41% (Approx.)

Return As Per Month Formula

30-24 x 100 x 12


=42.86% (Approx.)

Return As Per Year Formula

30-24 x 100 x 1


=4.17% (Approx.)

Compounded Annual Growth Rate (CAGR)

The return can also be seen through the formula of CAGR, which is right under your eye line.

Return=(Current NAV/NAV at the time of purchase)/(365/no of days or (1/no of years)-1

For Example-While purchasing an MF scheme, the NAV stood at ₹12 per unit. Now, the NAV has risen to ₹25 after 3 years. In that case, the return as per CAGR will come out to be 27.72%

So, how’s been the learning of mutual fund NAV? I hope you would have deciphered the aspect very well by taking a cue from the formulae shown all the way through the article. Remember, the strategy of your mutual funds investment portfolio depends greatly on your financial goals and investment horizon. Goals, which require a huge surplus money, would need a long-term investment in mutual funds to get fulfilled. So, have a long-term investment strategy in place to accomplish your goals in the earnest.


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