mutual-funds2 min read
Why NAV Doesn’t Matter Much
Why NAV Doesn’t Matter Much
Many new investors believe that a mutual fund with a lower NAV (Net Asset Value) is cheaper and therefore better to buy. This is a common myth — but let’s break it down.
What is NAV?
NAV is the price of one unit of a mutual fund. It is calculated as:
NAV = (Total Assets – Liabilities) / Number of Outstanding Units
Just like the MRP of a product, NAV tells you the value per unit, not whether it's expensive or cheap in terms of returns.
Why Low NAV ≠ Better Investment
Let’s understand this with a simple example:
| Fund A | Fund B |
|---|---|
| NAV = ₹10 | NAV = ₹100 |
| You invest ₹1,000 | You invest ₹1,000 |
| You get 100 units | You get 10 units |
| NAV grows 10% | NAV grows 10% |
| New NAV = ₹11 | New NAV = ₹110 |
| Value = ₹1,100 | Value = ₹1,100 |
✅ Result: Same return!
✅ What Really Matters
Instead of focusing on NAV, look at:
- Fund's historical performance
- Fund manager's experience
- Expense ratio
- Portfolio allocation
- Your investment goals and risk profile
Conclusion
Don’t judge a mutual fund by its NAV. Whether it’s ₹10 or ₹100, what matters is how well the fund performs over time. Focus on long-term growth, not just the price per unit.
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Frequently Asked Questions (FAQ)
- Does a lower NAV mean a mutual fund is cheaper or better?No, a lower NAV does not mean a fund is cheaper or will give better returns. NAV only reflects the per-unit price, not the value or growth potential.
- What should I look for when choosing a mutual fund?Focus on the fund's historical performance, fund manager's track record, expense ratio, portfolio allocation, and how well it matches your goals.
- Will I get more returns if I buy a fund with a low NAV?Returns depend on the fund's performance, not its NAV. Whether you buy at ₹10 or ₹100 NAV, your percentage returns are the same if the fund grows equally.
- Is it better to invest in a new fund with a low NAV?Not necessarily. New funds may have low NAVs but lack a performance track record. Always check the fund's strategy and management.
- Why do some funds have high NAVs and others low?NAV depends on when the fund was launched and how much it has grown. It does not indicate quality or future returns.
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