NAV of Mutual Fund or the Net Asset Value is the unit price of a mutual fund scheme. Mutual funds are bought or sold on the basis of NAV. Unlike share prices which changes constantly during the trading hours, the NAV of mutual fund is determined on a daily basis, computed at the end of the market closure based on closing price of all the securities that the mutual fund scheme owns after making appropriate adjustments.
Investors should note that, the expenses of a mutual fund scheme like fund management, administration, distribution etc. are charged proportionately against the assets of the scheme and are adjusted in the NAV of the mutual fund scheme. The NAV of mutual fund that you see in the public domain is post adjustment of these expenses.
To see the latest NAV of Mutual Fund schemes you can visit this website http://www.amfiindia.com/net-asset-value
Mutual fund scheme units are priced at par value or face value which is usually at Rs 10, at the time of the New Funds Offer (NFO). The scheme NAV goes up or down depending on the closing market value of the respective securities held in the portfolio. Schemes which are older are likely to have higher NAVs compared to the schemes that are new because the NAVs of older schemes have had more time to grow.
Now that we know what is the meaning of NAV in Mutual Fund, let us also know few common misconceptions about NAVs in mutual fund. Read more about common misconceptions about Mutual Fund NAVs
For example, if the NAV of a scheme is Rs 50 and the scheme declares a dividend of Rs 5, the Net Asset Value (ex-dividend) will fall to Rs 45 just after the dividend is declared. There is no advantage in investing in schemes which pay dividends unless you are looking for regular return from your mutual fund investments. Therefore, if you are interested in total returns the growth option is better as you benefit from power of compounding.
See the list of top performing mutual funds in India
NAVof a mutual fund should not be the criteria of selecting a mutual fund scheme. The track record of the scheme and the ability of its fund manager in terms of delivering superior risk adjusted returns can only determine whether the scheme will give good returns in the future or not.
Now that you know what is NAV in mutual fund, you must also know what are the benefits of investing in Mutual Funds in India