New Delhi, Sept. 6 -- NAV, or Net Asset Value, is often described as the 'price' of a mutual fund unit. Understanding what NAV actually means can help investors make better-informed decisions while selecting a mutual fund (MF) scheme.

An NAV represents the value of one unit of a mutual fund scheme. It is calculated based on the market value of the scheme's investments and other assets, after deducting liabilities and provisions, and then dividing the resulting amount by the total number of units outstanding. This is broadly the principle prescribed by SEBI for NAV calculation.

NAV tells an investor what each unit of a mutual fund is worth. However, it does not indicate how well the scheme is likely to perform in the future. Similarly, a...