Net Asset Value
The price of one unit of a mutual fund is known as its net asset value.
That is the price of one mutual fund unit.
The number of units you get when you invest a specific amount in a mutual fund is determined by the price of each unit (which is the NAV).
A lower NAV does not always imply better returns, and a higher NAV does not always imply lower returns.
The NAV is simply the worth of a mutual fund unit.
How does the NAV change?
The NAV is determined by the value of the mutual fund’s assets (investments).
So, in essence, the price of each unit (which is what NAV stands for) is determined by the total value of a mutual fund’s assets (be it stocks, bonds, or others).
As the value of the stocks rises over time, so does the NAV value.
You earn a higher price when you sell your mutual fund units and withdraw them.
Again, Investing in a mutual fund with a low NAV will not benefit you as an investor.
It ultimately comes down to the mutual fund’s underlying assets.
Think that for a moment.