Fund X's NAV: Before and After
Date | Corpus (Rs) | No. of Units | NAV (Rs) |
21-Sep-03 | 50,000 | 5,000 | 10 |
21-Oct-03 | 60,000 | 5,000 | 12 |
It is commonly believed that the later NAV (Rs 12) is more "expensive" vis-à-vis the earlier one (Rs 10). Investors tend to draw parallels between share prices and NAVs of mutual fund units leading to this misconception. Stock prices are different from NAVs and a comparison between the two is fundamentally flawed on the following grounds
NAV Growth
Schemes | NAVs on | Growth | |
Jan 1, 2003 | Oct 21, 2003 | ||
FRANKLIN INDIA BLUECHIP (G) | 23.55 | 38.97 | 65.5% |
J M EQUITY (G) | 7.44 | 12.04 | 61.8% |
PRUICICI GROWTH (G) | 19.86 | 30.23 | 52.2% |
HDFC TOP 200 (G) | 21.70 | 31.57 | 45.5% |
K 30 (D) | 12.10 | 16.56 | 36.9% |
The above table throws up a very interesting picture. During the period under consideration the best growths have been recorded by the funds with the "lowest" (J M Equity- Rs 7.44) and the "highest" (Franklin India Bluechip- Rs 23.55) NAVs respectively. On the other hand the least growth has been recorded by K 30 (D), a fund with a low NAV. Clearly the data suggests that there is no correlation between the NAV size and the returns.
While selecting a fund, the NAV shouldn't be the criteria. A low NAV need not mean that it's a good buy. A NAV could languish for a host of reasons including inept fund management, inadequate diversification, etc.
As an investor what you need to consider is the fund, its portfolio and the style of management. The NAV does not matter!