What is NAV in mutual funds and does it matter

If you’ve ever opened Groww or Kuvera and seen numbers like ₹342.56 or ₹18.72 next to a fund name and wondered what they mean — that’s the NAV. And if you’ve ever avoided a fund because the number felt “too high,” or chosen one because it seemed “cheap,” this article is specifically for you.

What NAV Actually Means

NAV stands for Net Asset Value. It’s simply the price of one unit of a mutual fund on any given day.

Here’s how it works. A mutual fund pools money from thousands of investors and buys stocks, bonds, or other assets. The total value of everything it owns, minus any expenses, divided by the number of units issued — that’s the NAV.

If a fund manages ₹500 crore worth of assets and has issued 10 crore units, the NAV is ₹50 per unit. Tomorrow, if the stocks it holds go up in value and the fund is worth ₹510 crore, the NAV becomes ₹51. Your units are now worth more.

The Big Misconception: High NAV ≠ Expensive

This is where most people go wrong, and it costs them.

Say you’re a 28-year-old software engineer in Pune earning ₹90,000 a month. You’re comparing two large-cap funds. Fund A has a NAV of ₹280. Fund B has a NAV of ₹42. You think Fund B is the better deal because the units are “cheaper.” That thinking is a trap.

If you invest ₹10,000 in Fund A, you get roughly 35.7 units. In Fund B, you get roughly 238 units. But here’s the thing — the number of units you hold is irrelevant on its own. What matters is what those units are worth, and how much they grow.

If both funds return 12% over the next year, your ₹10,000 becomes ₹11,200 in either case. You don’t make more money from Fund B just because you got more units. A fund’s NAV being low doesn’t mean it has more room to grow. That logic would be like saying a ₹50 share is cheaper than a ₹5,000 share — without asking what the underlying company is actually worth.

What Actually Determines Your Returns

The NAV going up is not the goal. The rate at which NAV grows is what matters. This is measured by CAGR — Compounded Annual Growth Rate, which means the steady yearly return that would get you from your starting value to your ending value.

Let’s make this concrete. Suppose you start a SIP of ₹14,000 per month in an equity mutual fund through Kuvera. The fund has a NAV of ₹210 today. Over 10 years, the fund delivers a CAGR of 13%. By the end of the decade, your total investment of ₹16.8 lakh has grown to approximately ₹33.5 lakh.

Now imagine a different fund with a NAV of ₹35 but a CAGR of only 9%. Same ₹14,000 SIP. Same 10 years. You end up with roughly ₹26.7 lakh. You got far more units, but you made ₹6.8 lakh less. The NAV at entry was irrelevant. The growth rate was everything.

The One Thing NAV Does Tell You

Here’s where NAV is actually useful: it tells you something about a fund’s history and vintage.

A fund with a NAV of ₹900 has almost certainly been around for a long time and has compounded well over the years. An older, high-NAV fund like HDFC Flexi Cap or SBI Bluechip has that high NAV because it’s genuinely grown over decades. That’s a good sign — not a warning.

A fund with a NAV of ₹12 is probably newer or hasn’t grown much. That’s not automatically bad either, but you shouldn’t pick it just because the number feels accessible.

What You Should Actually Look At

Ignore the NAV when choosing a fund. Instead, look at three things: the fund’s CAGR over 5 and 10 years, how it performed compared to its benchmark index (like Nifty 50), and its expense ratio — the annual fee the fund charges you, expressed as a percentage. A fund charging 1.8% expense ratio eats significantly more of your returns than one charging 0.5%, compounded over 10 to 15 years.

For most salaried investors doing SIPs, these are the numbers worth caring about. NAV on the day you start investing is noise.

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Frequently Asked Questions

Is a lower NAV better for SIP investors?

No. When you do a SIP, you automatically buy more units when NAV is low and fewer when it’s high — this is called rupee cost averaging. The starting NAV doesn’t give you an advantage. What matters is the fund’s long-term growth rate.

Does NAV change every day?

Yes. SEBI requires mutual funds to publish their NAV at the end of every business day. The NAV reflects the closing market value of all assets the fund holds that day.

If I buy when NAV is high, am I overpaying?

No. Buying at a high NAV just means the fund has already grown — it doesn’t mean you’ve paid a premium. You’re not overpaying any more than you’d be “overpaying” for Infosys stock because it costs more than it did in 2010.

Why do NFOs (New Fund Offers) always start at ₹10?

SEBI mandates that new mutual funds launch at a face value of ₹10 per unit. This is just a starting point — it has no bearing on whether the fund is a good investment or likely to grow faster than an established fund.

Should I switch from a high-NAV fund to a lower-NAV one?

No. Switching funds based on NAV is one of the most common and costly mistakes retail investors make. Evaluate funds on performance, consistency, and cost — not the price of a unit.