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NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

Net Asset Value (NAV) Concept and Calculation

Updated 11 October 2026 · Fact-checked

NAV is the value of one unit of a mutual fund scheme. Calculate it as (market value of assets − liabilities and accrued expenses) ÷ number of units outstanding. The result is the per-unit price used for purchases and redemptions. Open-ended schemes declare NAV every business day.

Understand Net Asset Value (NAV) Concept and Calculation

A mutual fund pools money from many investors and issues units in return. The fund buys securities with that money. NAV tells you what one unit is worth today.

Net Asset Value (NAV) is the net value of the scheme's assets, divided equally across all units. Assets are mostly securities at market value, plus cash, bank balances and accrued income such as interest and dividends receivable. Liabilities are amounts the scheme owes, such as accrued expenses and payables.

NAV changes because the market value of the portfolio changes. It also moves with income accrued and expenses charged. It does not move because investors buy or sell units at NAV. If the fund issues new units at NAV, assets and units rise in the same proportion, so NAV stays the same.

A high NAV does not mean an expensive or better fund. A fund at ₹10 and a fund at ₹500 can earn the same percentage return. What matters is the change in NAV, not its level.

Open-ended schemes declare NAV on every business day. AMCs publish it on the AMC website and on the AMFI website, usually by 11 pm on the same day. Units are bought and redeemed at NAV, adjusted for any load that applies. Under SEBI rules, NAV of the scheme is calculated and disclosed to the unit holder. Closed-ended schemes and interval schemes also have to declare NAV, but the frequency differs by scheme type, so check the scheme's offer document. On an NFO, units are usually issued at ₹10 each.

Key formulas to remember

NAV per unit
NAV = (Market value of investments + Other assets − Liabilities and accrued expenses) ÷ Units outstanding
Use net assets in the numerator. Units outstanding is the figure at the valuation date.
Net assets
Net assets = Total assets − Total liabilities
Total assets include accrued income and receivables. Liabilities include accrued expenses and payables.
Units from an investment
Units allotted = Amount invested ÷ Applicable NAV
Any exit load or stamp duty is handled separately. Check whether the question asks for the net amount invested.
Redemption value
Redemption value = Units × NAV, less exit load if any
Exit load is a percentage of the NAV or of the redemption value.
Percentage change in NAV
Change % = (Closing NAV − Opening NAV) ÷ Opening NAV × 100
This is the basic return over the period, before considering dividends.

How to solve Net Asset Value (NAV) Concept and Calculation questions

Use this method for any NAV question, whether it asks for NAV, units or value.

  1. 1Read what is asked: NAV, units, redemption value or percentage change.
  2. 2List all assets at market value, including cash and accrued income.
  3. 3List all liabilities, including accrued expenses and payables.
  4. 4Subtract liabilities from assets to get net assets.
  5. 5Divide net assets by units outstanding to get NAV.
  6. 6If units or value are asked, apply Units = Amount ÷ NAV or Value = Units × NAV.
  7. 7Apply load only if the question gives one, and check the rounding asked for.
  8. 8Sanity check: NAV should be close to the starting NAV adjusted for the portfolio's change.

Quickest way: Net first, divide last

When to use it: Use this when the question lists several assets and liabilities and the options are close in value.

  1. Add the asset items in one pass.
  2. Add the liability items in one pass.
  3. Subtract once to get net assets.
  4. Divide by units and round at the end only.
  5. Eliminate options that used total assets or ignored liabilities.

Common mistakes in Net Asset Value (NAV) Concept and Calculation

  • Dividing total assets by units without deducting liabilities.

    The word 'net' is overlooked when options look close.

    Fix: Always subtract liabilities and accrued expenses before dividing.

  • Thinking a lower NAV means a cheaper and better fund.

    NAV is mistaken for a share price.

    Fix: Remember that NAV is value per unit. Compare funds on percentage returns, not NAV levels.

  • Believing NAV changes when investors buy or sell units at NAV.

    Students forget that units and assets change together.

    Fix: Fresh money adds assets and units in equal proportion, so NAV is unchanged.

  • Leaving out accrued income or expenses.

    Only the portfolio securities are counted.

    Fix: Include cash, interest and dividend receivable as assets, and accrued expenses as liabilities.

  • Using the wrong units, such as units before a redemption.

    The question mentions both opening and closing units.

    Fix: Use the units outstanding on the valuation date.

  • Applying exit load to the units purchase calculation.

    Load is confused with entry charges.

    Fix: Units are bought at the applicable NAV. Exit load applies only on redemption, and only if the question states it.

Worked examples

Example 1

A scheme has investments at market value of ₹95,00,000, cash of ₹3,00,000 and interest receivable of ₹2,00,000. Accrued expenses are ₹1,00,000 and other payables are ₹4,00,000. There are 9,00,000 units outstanding. Find the NAV per unit.

Show the solution
  1. Total assets = 95,00,000 + 3,00,000 + 2,00,000 = ₹1,00,00,000.
  2. Total liabilities = 1,00,000 + 4,00,000 = ₹5,00,000.
  3. Net assets = 1,00,00,000 − 5,00,000 = ₹95,00,000.
  4. NAV = 95,00,000 ÷ 9,00,000 = 10.5556.

Answer: NAV is about ₹10.56 per unit.

Example 2

An investor invests ₹50,000 in a scheme when the applicable NAV is ₹25.00. A year later NAV is ₹30.00. Find the units held and the value of the holding, ignoring all loads and taxes.

Show the solution
  1. Units = 50,000 ÷ 25 = 2,000 units.
  2. Value = 2,000 × 30 = ₹60,000.
  3. Gain = 60,000 − 50,000 = ₹10,000.
  4. Check: NAV change = (30 − 25) ÷ 25 × 100 = 20%, and 20% of 50,000 is ₹10,000.

Answer: The investor holds 2,000 units worth ₹60,000.

Exam tips

  • Read for the words 'net' and 'accrued expenses'. Most trap options ignore liabilities.
  • Questions on NAV level are conceptual. A higher NAV does not mean a better fund.
  • Know that open-ended schemes declare NAV every business day and that new units are priced at the applicable NAV.
  • Do the arithmetic once and round last. Options often differ only in the second decimal.
  • Remember that NFO units are usually issued at ₹10, with the scheme's offer document as the final reference.

Practice questions from Net Asset Value, Total Expense Ratio and Pricing of Units

Net Asset Value (NAV) Concept and Calculation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Net Asset Value (NAV) Concept and Calculation: frequently asked questions

What is NAV in a mutual fund?

NAV is the value of one unit of a scheme. It equals net assets divided by units outstanding. You buy and redeem units at NAV, adjusted for any load.

How often is NAV declared?

Open-ended schemes declare NAV on every business day. The AMC publishes it on its website and on the AMFI website. Other scheme types follow the schedule in their offer documents.

Does a low NAV mean a fund is cheap?

No. NAV is not a price-to-value measure. Two funds with different NAVs can give the same percentage return, so compare returns, not NAV levels.

Does NAV change when I invest in a fund?

No. Your money adds to assets and new units are issued at NAV, so NAV per unit stays the same. NAV moves with the market value of the portfolio and with income and expenses.