Capital Market Chronicles – Episode 88: NAV – Not Another Vegetable!

 📦 Capital Market Chronicles – Episode 88: NAV – Not Another Vegetable!

Welcome, dear reader, to another journey into the buzzing beehive of Mutual Funds. Today’s topic? The humble yet mighty NAV—short for Net Asset Value, not “Naughty Aunt Vimla,” though she, too, has hidden value and fluctuating moods.

You may have heard that NAV is important. You may have nodded sagely when someone mentioned it at a cocktail party. But what is it? And does it affect your wallet more than your cholesterol?

Let’s dig in.

🧮 What on Earth Is NAV?

NAV is the per-unit price of a mutual fund. It’s the sticker slapped on each mutual fund unit, telling you: “This is what a bite of this investment costs today.”

Think of a mutual fund as a giant biryani pot. The NAV tells you the cost of a single spoonful. Some pots may have started with more rice, others with more masala. But it’s not about how much it cost at the beginning—what matters is how tasty it gets over time!

🍱 Myth-Busting Moment: Lower NAV ≠ Cheaper or Better!

Many first-time investors chase funds with low NAVs, thinking, “Aha! Bargain!”

Wrong.

It’s like thinking a ₹20 dosa is automatically better than a ₹60 pizza. The NAV only tells you the price per unit, not how well it performs. A fund with ₹10 NAV and a fund with ₹100 NAV can both grow by 10%, and guess what—you'll earn the same return on your investment.

💡 It’s the chef (fund manager) and the ingredients (underlying assets) that count, not the price tag.

🔍 How NAV Is Cooked Up

Let’s take a peek inside the fund manager’s kitchen:

NAV = (Total Assets – Liabilities) ÷ Number of Outstanding Units

• Assets = Stocks, bonds, cash (and the occasional dash of hope).

• Liabilities = Expenses, fees, and miscellaneous headaches.

• Outstanding Units = Spoons in the pot.

It’s like making chai for five people—you add water, milk, sugar, tea, and subtract whatever the neighbour borrowed—and divide by five cups.

🤯 Real-Life Example (But with No Algebraic Trauma)

You invest ₹15,000 each in two schemes:

• Scheme X NAV = ₹10 → You get 1,500 units

• Scheme Y NAV = ₹15 → You get 1,000 units

Both grow 10%. Their NAVs become ₹11 and ₹16.50, respectively.

Your value in both = ₹16,500.

💥 Moral: Whether your train has 10 compartments or 15, you still reach the same destination if the engine pulls you well!

📉 Why NAV Goes Up, Down, and Occasionally Sideways

NAV changes based on the market value of assets the fund holds.

• If the stocks/bonds in your fund go up—the NAV goes up.

• If they nosedive faster than your Wi-Fi during Zoom calls, NAV goes down.

That’s why checking NAV is like checking the weather before a picnic: it doesn’t change your plan, but it helps you prepare.

⏲️ When Is NAV Calculated?

Every trading day, after the market has packed up and gone home, the NAV is calculated, like a daily financial report card.

So if you buy/sell on a Tuesday, you’ll get Tuesday’s NAV—revealed only at the end of the day, not in advance. This isn’t Amazon Prime. There's no "live tracking."

💹 What About ETFs?

ETFs are rebellious teenagers of the mutual fund family.

They trade like stocks during market hours. Their prices fluctuate all day based on demand and supply. While the official NAV is still calculated daily, ETFs might trade at a premium (above NAV) or discount (below NAV).

Like buying mangoes in a local market—sometimes you pay more because they look juicy, sometimes less because the vendor sneezed on them.

🧠 Final Words of NAV Wisdom

So, next time someone brags about investing in a fund with “low NAV,” smile politely, sip your chai, and whisper, “It’s not the starting line, it’s the finish line that matters.”

NAV is just the price tag. The real magic lies in the fund’s performance, management, assets, and long-term growth.

And remember—always read the ingredients (prospectus), trust the chef (fund manager), and don’t judge a biryani by the spoonful.

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📚 Prefer your reading with chai in one hand and market wisdom in the other? Now available on Amazon Kindle

• Stock Market Decoded - A Beginner's Guide to Smart Investing by P. Shirley — perfect for sounding smarter than your portfolio at dinner parties.

• Money Money Money – Tickling You into an Investing Habit by P. Shirley — the nudge your lazy rupees have been waiting for. 

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