In the context of SIP (Systematic Investment Plan), NAV (Net Asset Value) refers to the value of one unit of the mutual fund scheme in which an investor has chosen to invest. When an investor starts a SIP, they are essentially investing a fixed amount of money at regular intervals (such as monthly) in a mutual fund scheme. The number of units of the mutual fund that the investor will receive is calculated based on the current NAV of the scheme.
For example, if an investor invests Rs. 5,000 in a mutual fund scheme via a SIP, and the current NAV of the scheme is Rs. 50, then the investor will receive 100 units of the scheme (i.e., 5,000/50). If the NAV of the scheme increases to Rs. 60 by the next SIP installment, then the investor will receive fewer units (83.33 units) for the same amount of investment. Conversely, if the NAV of the scheme decreases to Rs. 40 by the next SIP installment, then the investor will receive more units (125 units) for the same amount of investment.
The NAV of a mutual fund scheme is calculated at the end of each trading day and is based on the current market value of the securities held by the scheme. It is an important metric for mutual fund investors, as it provides an indication of the value of their investments and can help them track the performance of the scheme over time. However, it is important to remember that the NAV of a mutual fund can fluctuate based on market conditions and other factors, and that past performance is not necessarily indicative of future results.