When you buy a mutual fund, there's no live ticking price like a stock. Instead there's a single number set once a day — the NAV, or net asset value. Understanding it clears up one of the most common (and costly) beginner myths. This is for learning only.
What NAV is
A mutual fund pools everyone's money and buys a basket of stocks or bonds. NAV = (the value of everything the fund owns − its expenses) ÷ the number of units outstanding. It's calculated once after the market closes, so every buyer and seller that day transacts at the same end-of-day NAV.
The myth: "low NAV means cheap"
This trips up almost everyone. A fund with a NAV of ₹10 is not cheaper or better value than one with a NAV of ₹500. What matters is the percentage the NAV grows. Put ₹10,000 in each: if both rise 10%, both become ₹11,000. You simply get more units of the ₹10 fund and fewer of the ₹500 fund — the return is identical. A low NAV usually just means a newer fund.
How your returns work
Your value = units you hold × current NAV. If you bought at a NAV of ₹100 and it's now ₹130, you're up 30%, regardless of how many units that was. The NAV already includes the fund's running cost (the expense ratio), which is why a cheaper fund quietly compounds to more over time — see the fees that cost you lakhs.
Direct vs regular
The same fund has two NAVs: a direct plan (no distributor commission, higher NAV over time) and a regular plan (commission built in, lower NAV). Same portfolio, different cost — the direct plan keeps more of the return in your pocket.
So ignore the headline NAV number entirely — judge a fund by its cost, consistency and what it holds. For how funds compare with picking stocks yourself, see index funds vs active funds.
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