A Lower NAV Is Not a Cheaper Fund

Published 23 October 2026 · Darshan Saikia, Founder, MoneyBag Capital Distribution

Two funds, two numbers: ₹12 and ₹240. The first looks like the bargain. It isn't, and the reason takes one minute to see.

A friend sends you two fund names. One has a NAV of ₹12, the other ₹240. "Take the first one," they say, "you get twenty times as many units." It sounds like buying tomatoes at ₹12 a kilo instead of ₹240.

It is one of the most common misreadings in mutual funds. A fund is not a vegetable, and its NAV is not its price tag in that sense. Here is what the number actually is.

What NAV is

NAV stands for Net Asset Value. Take everything a scheme holds, the shares, bonds and cash, subtract its expenses, and divide by the number of units it has issued. The result is the value of one unit today.

A round cake on a brass plate, cut into equal slices, one slice set apart. — NAV is the value of one slice, not a measure of the cake.

That is all it tells you. A fund's NAV mostly reflects how long it has been running and how its holdings have moved since it started. A fund launched fifteen years ago will usually have a higher NAV than one launched last year, for no reason other than time.

Same money, same slice

Say you invest ₹10,000. At a NAV of ₹20 you get 500 units. At a NAV of ₹200 you get 50 units. Either way, you own ₹10,000 of what that scheme holds.

Two plates side by side, one with many thin slices, the other with a few thick slices of the same cake. — More units, or fewer, of the same amount.

When the holdings move, both NAVs move by the same percentage. If what each scheme holds rises 5%, a ₹20 NAV becomes ₹21 and a ₹200 NAV becomes ₹210. Your ₹10,000 is ₹10,500 in both cases. The number of units never did anything for you.

The ₹10 new fund offer

New fund offers are usually priced at ₹10 a unit, which can make them look cheap next to older funds. That ₹10 is a starting point, not a discount. A new fund is not better or worse value because its first NAV is round and low.

What to look at instead

What the scheme holds: its category and its portfolio, which decide what your money is exposed to.
What it costs: the expense ratio, taken out of the fund every year.
How risky it is: the riskometer and the scheme's risk level.
Whether it suits your goal: your time horizon and the money you can leave alone.

The scheme document covers all four. Its NAV covers none of them. For more on how the choice of scheme matters, see a SIP is a schedule, not a product. If you would like to go through what a scheme actually holds, talk to us.

NAV tells you the price of a unit, not the value of a fund.