What NAV is, and which day's NAV you actually get

The price per unit, worked out at day's end

A mutual fund pools money from thousands of investors and divides it into units. The net asset value (NAV) is what one unit is worth at the end of a business day:

NAV = (value of all holdings + cash − liabilities and expenses) ÷ units outstanding

If a fund holds securities and cash worth ₹1,010 crore, owes ₹10 crore in accrued expenses and has 50 crore units outstanding, its NAV is (1,010 − 10) ÷ 50 = ₹20.

Because it needs closing prices for every holding, the NAV is computed after the market closes. Equity funds typically publish in the evening; some funds, such as those with overseas holdings, publish the next morning. AMFI collects the figures, which is why the NAV history the site uses is a once-a-day series.

What moves it, and what doesn't

NAV rises and falls with the market value of the portfolio. It also drops a little each day by the fund's expense ratio, which is deducted continuously inside the NAV. You never see a separate charge: it shows up as a slightly lower NAV than the portfolio alone would imply. The gap between Direct and Regular plans comes from here; the same portfolio has two NAVs, and the Direct one is higher because its expenses are lower.

Things that do not change what your holding is worth:

• A bonus or split of units, where the number of units rises and the NAV falls in proportion.
• An IDCW (dividend) payout, where the NAV falls by the payout, but you received that cash.

Which day's NAV do you get?

You never trade at the NAV you see on the screen. You get the NAV of a future calculation, determined by cut-off times:

The cut-off for debt-fund purchases depends on when the money actually reaches the fund, so a payment that clears late may be priced a day later. Holidays and weekends push everything to the next business day. Check your fund's scheme document for the exact times.

This is why a SIP date matters less than people think. See does SIP date matter.

The most common NAV misunderstanding

Many beginners prefer a fund with a "low NAV" such as ₹12 over one at ₹120, assuming it is cheaper. It is not. If you invest ₹12,000 in each, you get 1,000 units of one and 100 units of the other; if both portfolios rise 10%, both holdings are worth ₹13,200. NAV is an accident of when the fund launched (most start at ₹10) and how much it has grown since.

We cover this in detail in the low NAV myth. What to compare instead is the percentage return, the expense ratio, the portfolio's risk and the manager's process. The five questions to ask before buying a fund is a quick checklist.

How to read a NAV chart

A NAV chart is a single line, but a few habits help.

• Look at the percentage change, not the rupee level. A NAV going from ₹40 to ₹60 is a 50% change; so is ₹400 to ₹600.
• Compare against a benchmark over the same dates. A fund that rose 8% in a year when its benchmark rose 15% did not do well.
• Remember that IDCW plans are distorted. Their NAV drops with each payout, so the line understates the fund's results. Use the Growth plan's NAV for performance. (A few funds carry an IDCW option mislabelled as Growth, which is why checking the ISIN matters.)
• Treat sudden cliffs with suspicion. A drop of 90% in one day on a fund page is more often a segregated portfolio, a payout or a data glitch than a real loss.

The takeaway

NAV is a bookkeeping number: assets minus liabilities, divided by units. It tells you what you paid and what you hold, not whether a fund is good or cheap. The useful questions are percentage returns, costs and risk. For the mechanics of reading a fund page, see how to read a mutual fund factsheet, and use the screener to compare funds on the numbers that matter.