Units are the standard measure of ownership in a mutual fund — when you invest, you receive units proportional to your investment amount and the current NAV.
Every mutual fund scheme is divided into equal units. Investing ₹X at NAV ₹Y gives you X ÷ Y units. Units can be fractional (e.g., 234.789 units). Your total investment value at any point = units held × current NAV. Units are held either in a demat account or in the fund house's records linked to your folio number. Unlike shares, mutual fund units don't carry voting rights — they simply represent a proportional claim on the fund's assets.
Think of a mutual fund like a pizza cut into millions of slices. Each slice is a 'unit.' When you invest ₹5,000 and the pizza slice costs ₹50 (NAV = ₹50), you get 100 slices. If tomorrow each slice is worth ₹55, your 100 slices are worth ₹5,500. The number of slices you hold is your units. More money invested = more units. Higher NAV = each unit is worth more.
Units allotted = Amount invested ÷ NAV on the applicable date.
You can hold fractional units — systems support up to 3 decimal places.
Each SIP instalment buys a fresh batch of units at that month's NAV.
Total current value = units held × current NAV.
On redemption, units are cancelled proportional to the amount withdrawn.
Month 1: Invest ₹5,000 at NAV ₹100 → 50 units. Month 2: Invest ₹5,000 at NAV ₹110 → 45.45 units. Month 3: Invest ₹5,000 at NAV ₹90 → 55.56 units. Total units: 150.01. Total invested: ₹15,000. If current NAV is ₹105, total value = 150.01 × ₹105 = ₹15,751 (5% gain despite buying at ₹90, ₹100, ₹110).