# What is Net Asset Value or NAV?

Do you want to know about the NAV or Net Asset Value?  The NAV is the price you pay for a unit of a mutual fund scheme.

For instance, if the NAV is Rs 20 of a scheme, then to buy a unit of a scheme, you need to pay Rs 20. Similarly, you will get Rs 20 if you want to sell a unit of a scheme or a little less than Rs 20 if there is an exit load on sale. An exit load is applicable if a sale is made within a specified period just after an investment. Usually, the exit load is calculated as the percentage of the net asset value.

## How to Calculate the NAV of a Scheme?

The Net Asset Value of a Scheme = Total value of its Investment – Liabilities/Total Scheme Units.

In simple words, you can calculate the NAV of a scheme by deducting the total value of its liabilities (fees, etc) from the total value of its assets ( Cash, Investment, etc). Then you need to divide this value by the total number of units in a scheme, as NAV is expressed as scheme per unit value.

The NAV of a scheme goes up if the investment made by the scheme is going well; meaning when the investment prices go up, the NAV of a scheme will also go up and vice-versa.

## Can NAV of A Scheme Influence Investment Decisions?

First of all, should investors even make investment decisions based on the NAV of a mutual fund scheme? Let take an example for this, many mutual fund investors were of the point of view that the best time to invest in mutual funds is during NFO (New Fund Offer) as the units are offered at Rs 10.

Similarly, there are other investors who are of the view to invest in a mutual fund when the NAV value is low as the probability for NAV to go up is high.

All these two approaches are wrong. Perhaps the investors are comparing mutual funds units with listed stocks on exchanges. However, we should not compare mutual funds with stocks, as these two are different instruments of investment.

A stock price is the value of a company’s share. Also, the price works as a reflector of the expectation of the market from the company in the coming days or years. Whereas the NAV reflects the current value of assets minus liabilities for a scheme.