Lower NAV or Higher?
- Thread starter aidanhardy
- Start date
- Tags mutual funds nav
Investors generally tend to prefer a scheme with a lower NAV than a scheme with higher NAV. Sometimes, they believe that investing in a NFO when units are available at Rs 10 would be a better option than to choose a scheme with the same investment philosophy and category with a higher NAV. Investors should know that, its not the lower or higher NAV of the scheme, but the performance track record of the Fund House, Schemes, quality of services offered by the Fund House matter during selection of scheme from amongst the available options.
Suppose scheme A is available at a NAV of Rs.20 and another scheme B at Rs.50. Both schemes are diversified equity oriented schemes. Investor has put Rs. 10000 in each of the two schemes. He would get 500 units (10000/20) in scheme A and 200 units (10000/50) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 22 and that of scheme B to Rs. 55. Thus, the market value of investments would be Rs. 11000 (500* 22) in scheme A and it would be the same amount of Rs. 11000 in scheme B (200 * 55). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 35, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes. How efficiently the schemes are managed should be an important criterion and not higher or lower NAVs.
Warm Regards,
ICICI Prudential Mutual Fund
---------------------------------------
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Follow us on Twitter @iciciprumf
Suppose scheme A is available at a NAV of Rs.20 and another scheme B at Rs.50. Both schemes are diversified equity oriented schemes. Investor has put Rs. 10000 in each of the two schemes. He would get 500 units (10000/20) in scheme A and 200 units (10000/50) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally good and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 22 and that of scheme B to Rs. 55. Thus, the market value of investments would be Rs. 11000 (500* 22) in scheme A and it would be the same amount of Rs. 11000 in scheme B (200 * 55). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 35, should not be a factor for decision making by the investor. Similar is the case with income or debt-oriented schemes. How efficiently the schemes are managed should be an important criterion and not higher or lower NAVs.
Warm Regards,
ICICI Prudential Mutual Fund
---------------------------------------
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Follow us on Twitter @iciciprumf
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