Should High or Low NAV of a scheme impact your Investment Decision?
55 seconds read
When you order a ‘Large’ pizza over a ‘Regular’ one, do you find any difference in the taste of the two? Obviously not! Both are prepared using the same recipe and process. They just differ in their size and price. You get the same taste of a Farmhouse Pizza irrespective of the size you order from the menu.
Mutual Funds also offer a bit of the same taste as the pizza. When you buy a fund, you pay its price i.e. NAV to own a unit of the fund. A big fund with more investors putting their money in it will have a large asset base and thus a higher NAV. But the same fund may have had a much lower NAV when it was launched because NAV of a fund increases over time as the fund grows larger with more investors joining it. But does that mean the recipe of the fund has changed or the process of making it?
The allocation to different asset classes and kinds of securities and the fund management process remains the same if the investment objective of the fund hasn’t changed. Hence your return experience will remain unaffected irrespective of a fund’s NAV just like the taste from a slice of your Farmhouse Pizza irrespective of its size.