Confused about NAV?

When I started reading about Mutual Funds, I use to read about NAV as a measure of fund performace and I always got confused as to what exactly is this parameter. Then someone simplistically told me "It is the value of one unit of fund". That made sense since it gave me info about how rich I am with respect to my investment. For example if I have 400 units of a mutual fund and the NAV for that fund is 12 Rs, essentially at this point I have 4800 Rs (minus the administrative charges of the fund). But then how is the NAV calculated from the fund's perspective.

Here is a simple example :

Assume that the mutual fund has an initial investment of 100 units with each unit is worth Rs 10. Hence, the total amount with the fund is Rs 10,00. Let us now say that this amount is invested in one share of Reliance (say Rs 5,20) and one share of Sify (Rs 4,40) and the balance Rs 40 is held in cash

Let's assume that after some time, the value of the shares goes up to Rs 780 (Reliance), Rs 520 (Sify) and expenses incurred by the fund amount to Rs 50. The NAV will be:

(780+520+40-50) / 100 units = Rs 12.90

Thus the fund have achieved an absolute return of 29 per cent during the period. Pretty neat ..uh !!


  1. Is it(NAV) synonymous with (Asset-Liabilities)/no: of shares?

  2. I dont think so.. its more like price of one unit at any given point of time... a mutual fund.. might have huge assets and liabilities..and different scehmes out there. NAV is value of one MF unit of that scheme...