Last Updated on Dec 23, 2024 by Anjali Chourasiya
As an investor, the first thing you look at when buying a stock is its price. First, you evaluate whether it is affordable based on the absolute stock price. Then you determine whether a stock is under or overvalued and do a basic stock analysis. Only then you buy the stock. But what about mutual fund NAV?
Should you put as much emphasis on mutual fund NAV when buying units of a scheme? Is a mutual fund with a lower NAV better than a higher value? Should you track the NAV? In this article, we answer these and other important questions about mutual fund NAV.
Table of Contents
NAV Meaning in a Mutual Fund
When you invest in a mutual fund, you get its units. The price you pay to buy these units is measured in terms of NAV, which stands for net asset value. In simple terms, NAV is the price you pay to buy one unit of a mutual fund, and it reflects the total value of all the fund’s assets minus its liabilities. In other words, NAV is an indicator of how much a single unit of a mutual fund is worth at a given time. It is important to note that NAV in mutual funds can vary daily, depending on market fluctuations and the fund’s investment portfolio.
Formula for Calculating Mutual Fund NAV
(Value of securities held by the mutual fund + value of all receivables – value of all payables) / Number of units
For example, suppose MF XYZ holds securities worth Rs. 10,000, has receivables of Rs. 1,000, and payables of Rs. 1,000. The outstanding units are 100. Then the NAV of MF XYZ is (10,000 + 1,000 – 1,000)/100 = 1050/ 100 = Rs. 100.
When is Mutual Fund NAV Updated?
Many investors often ask, “When will mutual fund NAV update in India?” or “When is mutual fund NAV updated?” NAV is typically updated every business day. The update happens by 9 PM IST on working days after the markets close. This timing is referred to as the MF NAV update time.
However, there may be instances when mutual fund NAV is not updated due to holidays, non-working days, or unforeseen events. In such cases, the NAV update may be deferred until the next business day.
Does NAV in Mutual Funds Remain Constant?
NAV does not remain constant. It fluctuates daily because mutual funds invest in a variety of assets, such as stocks, bonds, or other securities. These investments are affected by market movements, and as their values change, the NAV also changes.
For example, if a mutual fund’s investments perform well, its NAV will likely increase. Conversely, if the market dips or the investments underperform, the NAV might decrease. Thus, the NAV in mutual funds stands for the real-time valuation of the fund’s assets.
Should You Prefer a Lower NAV Over a Higher One?
Many people wonder, “Should NAV be high or low when investing?” The answer is that a lower NAV is not necessarily better, nor is a higher NAV. NAV primarily reflects the per-unit price of the mutual fund and not its performance or growth potential.
For example:
- A newly launched mutual fund will generally have a lower NAV because it has just started accumulating assets.
- Older mutual funds may have higher NAVs because their investments have grown over time.
Instead of focusing only on NAV, you may want to consider other factors like:
- Assets Under Management (AUM): This represents the total value of assets managed by the fund.
- Past Performance: Reviewing the fund’s historical returns can give insights into its potential.
- Expense Ratio: This indicates the fund’s operating costs, which can affect overall returns.
- Risk Measures: Metrics like alpha and beta can help you assess the risk-adjusted performance.
- Tracking Error: This is particularly important for index funds and ETFs, as it measures how closely the fund mirrors the benchmark.
Remember, the NAV of a fund is not directly related to its profitability or investment efficiency. You can analyze all these factors to make an informed decision.
Is NAV Similar to the Stock Price?
Not exactly. While some may refer to NAV share price, the correct term is simply NAV (Net Asset Value). NAV and stock price serve different purposes and have distinct meanings:
- What does NAV stand for in the context of mutual funds? NAV stands for Net Asset Value, representing the per-unit value of a mutual fund. It is calculated by dividing the total value of the fund’s assets (minus liabilities) by the number of outstanding units.
- Stock Price: The stock price reflects the market value of a company and fluctuates throughout the trading day based on demand and supply dynamics.
| Aspect | NAV (Net Asset Value) | Stock Price |
| Definition | The per-unit value of a mutual fund. | The market value of a company’s stock. |
| Calculation | Total assets minus liabilities, divided by units. | Determined by market demand and supply. |
| Timing | Calculated once daily after market hours. | Changes continuously during trading hours. |
| Market Sensitivity | Based on the value of securities in the mutual fund. | Affected by demand, perception, and external factors. |
| Overvaluation/Undervaluation | Cannot be overvalued or undervalued. | Can be overvalued or undervalued. |
NAV is primarily used for mutual funds, while stock price applies to shares of companies. Understanding the distinction between these terms ensures clarity in evaluating investments.
How to Find NAV of Mutual Fund?
If you are wondering how to find the NAV of a mutual fund, platforms like Tickertape make it easy. For example, to check the NAV of HDFC Liquid Fund, follow these steps:
- Launch Tickertape on your mobile or web browser.
- Search for HDFC Liquid Fund in the search bar.
- Click on the fund name and hover over the price chart to view the mutual fund NAV.
This method provides not only the NAV but also additional details like the mutual fund update time and historical trends. If you are searching for funds with specific criteria, such as mutual fund NAV below Rs 10 in 2024, Tickertape’s filtering tools can be helpful.
Remember, the full form of NAV in mutual fund is Net Asset Value, and it represents the price per unit of the fund. The NAV is updated daily after the market closes, typically by 9 PM IST, referred to as the mutual fund NAV update time.
Why Mutual Fund NAV May Not Be Updated Today?
Sometimes, you may wonder, “Why is the mutual fund NAV not updated today?” This can happen due to:
- Holidays or Market Closures: NAV updates are skipped on non-working days.
- Technical Issues: Delays in processing may cause a temporary pause in updates.
- Late Transactions: Orders placed after 3 PM are processed based on the next working day’s NAV.
If you’re curious about when NAV is updated or at what time mutual fund NAV updates, remember that updates generally occur after markets close, typically by 9 PM on working days.
Difference Between NAV and AUM
When understanding mutual funds, it’s essential to differentiate between NAV (Net Asset Value) and AUM (Assets Under Management):
- NAV refers to the price per unit of a mutual fund and is calculated daily after market closure. It represents the value of one unit of the mutual fund.
- AUM, on the other hand, is the total market value of all the assets and cash held by the mutual fund. It reflects the scale of the fund and its overall size in monetary terms.
Both metrics are crucial, but while NAV indicates the unit price, AUM provides a broader picture of the fund’s capacity and influence.
Which Day’s NAV is Applied When Purchasing a Mutual Fund?
When purchasing or redeeming mutual funds, the mutual funds NAV applied depends on the time and day of your transaction:
- If the purchase is made before 3 PM on a working day, the NAV at the end of the same day is applied.
- If the purchase is made after 3 PM, the NAV at the end of the next working day is applicable.
- For transactions placed on holidays or non-working days, the NAV of the next working day is used.
These timings ensure uniformity and are often referred to when discussing when NAV is updated or when mutual fund NAV gets updated.
Do Nifty and Sensex Affect the NAV of a Mutual Fund?
The NAV of mutual funds may or may not be influenced by changes in Nifty and Sensex, depending on the type of fund:
- Index Funds or funds that invest heavily in Nifty and Sensex constituent stocks are directly affected by movements in these benchmark indices. For instance, large-cap mutual funds that allocate significant investments to the top companies in India may see their NAV fluctuate with changes in Nifty or Sensex.
- On the other hand, funds with diversified portfolios or investments in small- or mid-cap stocks may have NAVs less impacted by these indices.
Understanding how a fund’s NAV interacts with benchmark indices can help you gauge its potential sensitivity to market fluctuations.
Is the NAV in SIP the Same as That of a Lump Sum Investment?
Yes, the NAV in SIP (Systematic Investment Plan) is the same as that for a lump sum investment. Regardless of the mode of investment, the NAV reflects the per-unit price of the fund on the date of the transaction. Whether you invest via SIPs or as a one-time lump sum, the NAV of mutual funds remains consistent for all investors on that day.
Common Misconceptions About NAV
- NAV as a Performance Metric: Many people mistakenly believe that NAV indicates the performance of a mutual fund. However, NAV is only the per-unit price and does not reflect returns.
- SIP and NAV: Some investors think that the NAV in SIP (Systematic Investment Plan) directly impacts returns. In reality, NAV is just a means to allocate units, and returns depend on market performance over time.
Frequently asked questions (FAQs)
What is NAV in mutual funds?
NAV, or Net Asset Value, is the price per unit of a mutual fund, representing the fund’s assets minus liabilities. It reflects the value of one mutual fund unit on a given day.
What is the NAV full form in mutual funds?
NAV stands for net asset value. It is the cost per unit of a mutual fund.
Does NAV fluctuate like the stock price?
Yes. Mutual fund NAV can fluctuate like the stock price.
Should NAV history really matter?
Not really. NAV is not an indicator of the performance of the mutual fund. Therefore, it shouldn’t be the only factor to consider when making investment decisions.
Where can I find the live mutual fund NAV?
Mutual fund NAV is not updated in real-time but only after market hours. You can find the latest NAV of mutual funds instead.
Where to find the latest NAV of mutual funds?
One of the quickest ways to find the latest NAV of mutual funds is by launching the respective asset page on Tickertape. Go to Tickertape, type in the scheme name in the search box and select the fund. On the respective Mutual Fund Page, you will see a price chart where you can find the latest NAV of the mutual fund.
What is a good NAV for a mutual fund?
There is no good or bad NAV in a mutual fund. NAV doesn’t indicate the performance of a mutual fund.
What is the NAV meaning in SIP?
NAV in SIP means the price you have to pay to buy per unit of the mutual fund. The meaning of NAV is the same in the context of mutual fund investments, regardless of the method.
Should you track mutual fund NAV?
Not necessary. NAV is not an indicator of the mutual fund’s performance.
When does mutual fund nav gets updated?
Mutual fund NAV is updated daily on working days after the market closes, typically by 9 PM IST. Transactions made after 3 PM are processed with the next working day’s NAV.
What does NAV mean in SIP?
NAV means in SIP (Systematic Investment Plan), the Net Asset Value, which is the same as for lump sum investments. It represents the per-unit share price on the date of purchase or allocation.
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