What is NAV in Mutual Funds? Stop Chasing Low NAV

 One of the most common questions new investors ask is: "Should I buy Fund A because its NAV is only ₹15, while Fund B is 'expensive' at ₹150?" The short answer: No.

In the stock market, a lower price might mean a stock is undervalued. But in mutual funds, the Net Asset Value (NAV) is just a piece of math—it is not a price tag of "value."

What exactly is NAV?

Think of a mutual fund like a large pizza. The NAV is simply the price of one single slice.

  • If the total "pizza" (the fund's assets like stocks and cash) is worth ₹1,000 and it’s cut into 100 slices, the NAV is ₹10.

  • If the value of the ingredients (the stocks) goes up, the price of the slice goes up.

The formula is simple:

NAV = (Total assets - Total Liabilities)
          ____________________________
           Total number of Outstanding Units

The "Low NAV" Myth: Why it doesn't matter

Many investors believe that a low NAV gives them more units, which will lead to higher returns. Let’s bust that myth with a simple 2026 example.

Imagine you have ₹10,000 to invest. You are choosing between two funds that have the exact same stocks in their portfolio:


The Result: Even though you had "more units" in Fund A, your final wealth is exactly the same. Returns are driven by the percentage growth of the underlying stocks, not the number of units you hold.

3 Reasons Why a Fund Has a High NAV

Age: The fund has been around for 10–20 years and has compounded over time. A high NAV is often a sign of a consistent survivor.

Performance: The stocks inside the fund have grown significantly.

No Split: Unlike stocks, mutual funds rarely "split" their units to lower the price.


Why You Should Ignore NAV When Choosing a Fund

If NAV doesn't matter, what does? In 2026, focus on these three things instead:

Expense Ratio: How much is the AMC charging you to manage the money?

Tracking Error (for Index Funds): How closely does the fund follow its benchmark?

Portfolio Quality: Does the fund manager buy high-quality companies or "junk" stocks?


Pro-Tip for IndiaSIPTracker Readers:

The only time NAV "matters" is for your Systematic Investment Plan (SIP) (How to start investing in Mutual Fund)

  • When the market falls and NAV drops, your fixed ₹5,000 monthly investment buys more units.

  • This is called Rupee Cost Averaging. This is the only "Low NAV" strategy that actually works!

Stop chasing 'cheap' NAVs and start chasing 'cheap' expense ratios and high-quality management.




Location: Bengaluru, Karnataka, India

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