Kolkata: All investors want to know the NAV of an MF scheme. Simply put, NAV is the market value of the securities held by the scheme. The NAV per unit of a scheme is obtained dividing the market value of securities on a day by the total number of units of the scheme on that day. Mutual Funds collect money from investors and invest them in the securities markets.
The relation between securities and NAV of a mutual fund scheme is simple — since the value of securities changes on a day-to-day basis, the NAV of a fund changes too. Investors have a lot of misconceptions about NAV of mutual fund schemes. Since many try their hand at directly investing in MF schemes, without going through investment advisors, one should have a few crucial ideas clear about NAV before investing.
Should one invest in Mutual Fund on NAV basis?
Investors should not blindly invest in a mutual fund scheme on the basis of its NAV, just as one should not invest in a stock on the basis of its price. One has to judge the performance of a mutual fund against various parameters — past performance, AUM size, the sector where it invests, the risk factor inherent (Sebi has mandated the publication of risk-o-meter), history of returns, performance of the fund against its benchmark index etc.
Can NAV be over-valued, or under-valued?
If a mutual fund scheme is performing well, its NAV is often of no consequence to an investor. Experts would often point out that NAV of a mutual fund scheme is not like the price of a stock in the equity market. They would also say that an NAV cannot be over-valued or undervalued as the value of NAV is not controlled by demand. In the case of shares, the price is controlled by demand. The NAV is controlled only by the size of the AUM.
When to place purchase orders?
In a rising market, it is better if you place orders for purchase of new units before 2 pm since if you place orders before that cut off time, you would get to buy units at the NAV of the previous day. On the other hand, if you place the order after 2 pm, the NAV of the scheme at the end of the next day will be taken into account for transaction (which is likely to rise in a buoyant market). One should note that any purchase order on a holiday will take into account the NAV at the end of the next working day. Since the entire issue of NAV is quite complicated it is advisable to consult a qualified invetsment expert before putting your hard-earned money into any scheme.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds and crypto assets.)
Investment is all about value, When investing in a mutual fund scheme, the Net Asset Value, or NAV, of any scheme is something that one encounters almost always. Therefore, it is essential that one knows the basics of NAV of schemes and dispel some popular misconceptions. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
