Unit

When you invest in a mutual fund you do not buy the fund itself, you buy units of it. The number you get is your money divided by that day’s NAV, and you can hold fractions of a unit, so nothing is rounded away.

How units work

Think of the fund as a cake and units as slices. Invest ₹2,000 when the NAV is ₹40 and you get 50 units; invest the same ₹2,000 when the NAV is ₹20 and you get 100 units. Your holding at any time is simply the number of units you own multiplied by the current NAV. When the NAV rises, each unit is worth more and so is your total; when you redeem, the fund buys your units back at the day’s NAV.

Why a low NAV is not a cheap fund

This is the single most common beginner mistake. A fund with a NAV of ₹15 is not “cheaper” than one at ₹450. Put ₹10,000 into each and you simply get more units of the first, each worth less; both holdings are worth ₹10,000, and both grow by the same percentage if the funds rise equally. Your return comes from what the fund holds and how it performs, never from the NAV number.

Where units are recorded

Your units are recorded against your folio with the fund house, or in your demat account if you hold them there. The statement you receive lists the units, NAV and value for each scheme.