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How to Invest in SIP A Beginner's Guide
In summary
NAV, or Net Asset Value, tells you the value of one unit of a mutual fund scheme. It is calculated by deducting the scheme's liabilities from its assets and dividing the result by the number of outstanding units. NAV generally changes each business day as the market value of securities in the portfolio changes.
- NAV is a per-unit value, not a direct measure of fund quality.
- The basic NAV formula is (Total Assets − Total Liabilities) ÷ Outstanding Units.
- A lower NAV does not automatically make a fund cheaper or better.
- The applicable NAV depends on SEBI rules, transaction type, and fund availability.
- SEBI's Riskometer uses six risk levels, from Low to Very High.
The Bajaj Broking website provides access to 4,000+ mutual fund schemes, allowing you to compare schemes based on their objectives, risk levels, and other relevant factors.
What is NAV in mutual funds?
NAV stands for Net Asset Value. It represents the value of one unit of a mutual fund scheme.
A mutual fund pools money from investors and uses it to buy securities such as shares, bonds, and money market instruments. The value of these holdings changes over time. The scheme's NAV therefore changes as the value of its investments, liabilities, income, and expenses change.
For example, if a scheme has assets worth Rs. 500 crore, liabilities of Rs. 10 crore, and 49 crore outstanding units, its NAV would be:
NAV = (Rs. 500 crore − Rs. 10 crore) ÷ 49 crore = Rs. 10 per unit
If you invest Rs. 50,000 at an applicable NAV of Rs. 10, you would receive 5,000 units, before considering any applicable charges.
NAV is commonly used for open-ended mutual funds, where investors buy or redeem units from the fund based on the applicable NAV.
How is NAV calculated?
The standard NAV formula is:
NAV = (Total Assets − Total Liabilities) ÷ Number of Outstanding Units
The calculation considers the value of the securities and other assets held by the scheme, along with applicable liabilities and expenses. NAV is generally calculated using the value of the scheme's portfolio at the end of the relevant business day. AMFI explains NAV per unit as the market value of a scheme's securities divided by its outstanding units, with the scheme's liabilities also reflected in the calculation.
The NAV can change when:
- The market value of the scheme's investments changes.
- The scheme earns income such as interest or dividends.
- Expenses and other liabilities change.
- The number of outstanding units changes because of subscriptions or redemptions.
Why does NAV matter to investors?
NAV helps you understand the value of your mutual fund units and calculate the current value of your holding.
For example, if you own 2,000 units and the NAV is Rs. 25, your investment is worth Rs. 50,000 before applicable charges and taxes.
However, NAV should not be viewed in isolation. A higher NAV does not necessarily mean that a fund has performed better than a fund with a lower NAV. Two schemes with different NAVs can generate similar percentage returns if their underlying investments rise by the same proportion.
When evaluating a scheme, consider its investment objective, portfolio, historical performance, expense ratio, risk level, investment horizon, and other relevant factors. You can explore different mutual funds and compare these characteristics before investing.
How does the applicable NAV work?
The NAV applicable to your transaction depends on the type of transaction, the scheme, the time your application is received, and when the funds are available for utilisation.
For most mutual fund schemes other than liquid and overnight funds, SEBI's current rules specify a 3:00 p.m. cut-off for credit of subscription funds to the scheme's bank account. The closing NAV of the day on which funds are available for utilisation is generally applicable, irrespective of the size or time of receipt of the application.
The broad framework is:
| Transaction or scheme | Applicable timing |
|---|---|
| Subscription to most schemes | 3:00 p.m. cut-off for fund availability |
| Redemption from most schemes | 3:00 p.m. application cut-off |
| Liquid and overnight subscriptions | Special 1:30 p.m. provisions apply |
| Overnight fund online redemption | Special 7:00 p.m. provision may apply |
Last updated: October 2026
The exact applicable NAV can depend on whether funds have actually been received and are available for utilisation. Therefore, submitting an application before the cut-off does not by itself guarantee the same day's NAV.
What is the difference between NAV and market price?
For an open-ended mutual fund, transactions are generally processed using the applicable NAV, subject to applicable charges and regulatory rules.
Closed-ended funds can work differently because their units may trade on a stock exchange. Their market price can therefore be above or below the underlying NAV depending on demand and supply.
For a clearer comparison, see closed-end funds versus open-end funds.
Does a low NAV mean a mutual fund is better?
No. NAV should not be used as a simple indicator of whether a mutual fund is cheap, expensive, good, or poor.
Consider two schemes with NAVs of Rs. 20 and Rs. 200. If both increase by 10%, their NAVs become Rs. 22 and Rs. 220 respectively. Both have generated the same percentage growth even though their NAVs are very different.
Instead of selecting a scheme because its NAV is low, review its objective, portfolio, costs, risk level, performance over suitable periods, and how well it fits your investment goal.
How does NAV change after an income distribution?
When a mutual fund makes an income distribution, money leaves the scheme's assets. As a result, the NAV can fall by approximately the amount distributed per unit, subject to applicable statutory levies and other adjustments.
For example, if the NAV is Rs. 50 and an income distribution of Rs. 2 per unit is made, the NAV may fall to around Rs. 48 after the adjustment. This does not by itself indicate a fall in the underlying investment performance. The investor has received part of the scheme's value as a distribution.
How should beginners use NAV when comparing mutual funds?
NAV is useful for calculating the value of your units, but it should form only one part of your evaluation.
You can use the following approach:
- Check The fund's investment objective and category.
- Review The SEBI Riskometer and understand whether the risk level suits you.
- Compare The portfolio and asset allocation.
- Check The expense ratio and any applicable exit load.
- Review Historical performance over suitable periods rather than focusing on one NAV level.
- Consider Your investment horizon and ability to handle market fluctuations.
The SEBI Riskometer classifies mutual fund scheme risk as Low, Low to Moderate, Moderate, Moderately High, High, or Very High. It is a risk indicator, not a guarantee of returns or a prediction of future market movements.
The structure of mutual funds can also help you understand how a mutual fund is organised and how different entities and roles fit into its operation.
Conclusion
NAV is the per-unit value of a mutual fund scheme, calculated using its assets, liabilities, and outstanding units. It helps you value your holdings and understand how market movements affect the scheme's unit value. However, NAV alone cannot tell you whether a mutual fund is suitable. Consider the scheme's objective, portfolio, costs, risk level, performance, and your investment horizon before investing.
Last reviewed: October 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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What does NAV represent in a mutual fund statement?
NAV in a mutual fund statement shows the per-unit value used to value your holding on the relevant date. Your total investment value depends on both the NAV and the number of units you own. For instance, 1,000 units at an NAV of Rs. 30 represent Rs. 30,000 before applicable charges, taxes, or other adjustments.
Can two mutual funds have the same NAV but different returns?
Yes. Two schemes can have the same NAV while holding different portfolios, following different investment strategies, or incurring different expenses. Their future returns can therefore differ. NAV only represents the per-unit value at a particular point in time; it does not describe the scheme's investment objective, portfolio quality, risk, or expected return.
Does NAV determine the exact amount I will receive when I redeem?
NAV is used to determine the value of your redeemed units, but the final amount may differ because of applicable exit loads, taxes, or other permitted adjustments. The applicable NAV also depends on the transaction date and relevant SEBI rules. Check the scheme documents for applicable charges and redemption conditions before submitting a request.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.