How mutual fund NAV is set, in plain words

Q: NAV is calculated as:

Assets minus liabilities, divided by units. Net assets (assets minus liabilities) divided by the number of units gives the NAV.

Q: A scheme's NAV is computed:

Once each business day. A single NAV is struck each business day, unlike a live share price.

Q: A fund with a NAV of ₹200 versus one at ₹20 is:

Not necessarily costlier; NAV is just per-unit value. A higher NAV alone says nothing about cost or quality. It is just the per-unit value.

Q: Valuing holdings at today's market price each day is called:

Mark to market. Mark to market is the daily valuation that makes a fresh NAV possible.

How NAV is set

How the daily price is made

People fear a high NAV and chase a low one, both mistakes. This lesson fixes that by showing exactly what the number is and how it is made.

This lesson teaches a concept for the NISM Series V-A exam. It is education, not financial advice.

1
NAV is the value of everything a scheme holds, minus its liabilities, divided by the number of units.
2
Holdings are marked to market each day, so the NAV reflects today's prices.
3
NAV is computed once each business day, not moment to moment like a share price.
4
A higher NAV is not 'expensive' and a lower NAV is not 'cheap'. It is just the per-unit value.

Rupee example

A scheme worth ₹100 crore with 5 crore units has a NAV of ₹20. Put in ₹10,000 and you get 500 units.

Practice

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Real exam format. Answer by voice, tap, or press 1 to 4. No negative marking, so always attempt.

Answer by voice

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NAV is calculated as:

Net assets (assets minus liabilities) divided by the number of units gives the NAV.

It is not a sum of assets and liabilities, nor a share price.

A scheme's NAV is computed:

A single NAV is struck each business day, unlike a live share price.

It is neither continuous nor monthly.

A fund with a NAV of ₹200 versus one at ₹20 is:

A higher NAV alone says nothing about cost or quality. It is just the per-unit value.

Price per unit is not richness or risk.

Valuing holdings at today's market price each day is called:

Mark to market is the daily valuation that makes a fresh NAV possible.

The others are unrelated ideas.

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NISM V-A syllabus

1What a mutual fund really is

2How a fund is built

3Who watches over it

4The offer document, decoded

5Getting funds to investors

6Selling the right way

8NAV, loads and the daily price

9Types of schemes, and picking one

10Return, risk and performance

11How gains are taxed

12Serving the investor

See the full roadmap →