When you invest in a mutual fund, you invest in mutual fund units at that day’s price. The NAV is the per-unit price of a mutual fund.

The NAV of a mutual fund changes every business day.

Each mutual fund has to disclose the value of its NAV every business day compulsorily.

When the NAV goes above the NAV value you invested in; you make a profit. When the NAV goes below the NAV value you invested in; you make a loss. 

So, in that case, should we only reinvest when the NAV is lower than when we first purchased it?

No! That is not the case.

Always remember – You cannot time the market.

Purchase of mutual funds can take up to three business days. Till then, the NAV can move either up or down.

Investing in a regular SIP in mutual funds is better because you regularly buy at a higher and lower NAV. This later averages out your average NAV purchase value.

And in the long run, you can calculate the returns that are not heavily impacted due to higher or lower NAVs of the fund.

Points to remember

The NAV or the Net Asset Value of the mutual fund is the current value per unit of a mutual fund

The NAV of a mutual fund is the total value of the assets the mutual fund has invested in

The NAV of mutual funds changes every business day