Which one to choose? High NAV or Cheap NAV
What Is NAV and Why Does It Matter?
Whenever you check the performance of a mutual fund or SIP, you’ve probably seen the term NAV.
But
✍what exactly does it mean, and
✍why do investors talk about it so much?
Understanding NAV is essential for making smart investment decisions—especially if you want to grow wealth confidently and avoid common beginner mistakes.
You may also know๐
✍What Is NAV?
NAV (Net Asset Value) is the per-unit value of a mutual fund or in other word say it is the price of one unit of a fund on any given day.
When you invest in SIP/Mutul fund, you will get fixed numbers of units(Decided by NAV price of that day)
✍How NAV calculated?
It is calculated using a simple formula:
NAV = (Total Assets – Total Liabilities) ÷ Number of Units
Every business day, after the market closes, AMCs calculate and publish updated NAVs for each scheme.
✍Does a Higher or Lower NAV Mean Better Returns?
One of the biggest misconceptions among new investors is that a lower NAV means “cheaper” or “better to buy.”
For example:
- If you invest ₹10,000 in a High NAV fund (₹400), you get 25 units.
- If you invest the same in a Low NAV fund (₹40), you get 250 units.
At first glance, 250 units may look better.
But in reality, Mutual funds don’t work like stocks. A low NAV doesn’t mean a fund is undervalued, and a high NAV doesn’t mean it’s expensive.
What truly matters is the
๐Quality of the portfolio
๐Fund manager’s strategy
and
๐The consistency of performance, not the NAV number itself.
✍Why Is NAV Important?
why NAV still matters—even if it doesn’t decide good or bad funds:
1. Helps Track Your Investment Value
NAV is used to calculate your profits and returns.
If you bought at Rs. 20 and today’s NAV is Rs. 30, you’ve made gains of Rs10 or 50%. It’s that simple.
Example
Suppose you have invested 2 Lakh and got 10,000 units at the average buying price of RS.20 and now NAV reached Rs.30 then your invstement value will be
10000 X 30= Rs3 Lakh
2. Essential for SIP and Lumpsum Pricing
Each SIP installment buys units at that day’s NAV.
If NAV is low that day you will get more units and if NAV is high you will get fewer units.
This is how rupee-cost averaging works.
3. Transparency and Regulation
NAV ensures investors to know exact value of each unit.
Since SEBI mandates daily disclosure, NAV becomes a tool for transparency and trust.
4. Useful for Comparing Past Performance
While NAV alone doesn’t show if a fund is good but tracking how it has increased over time can help you understand its growth pattern.
✍When to Choose High NAV Funds?
- If the fund has a strong track record.
- If the fund manager and AMC have a good reputation.
- If the fund has shown consistent performance over the long term.
- If you prefer a reliable and stable investment.
✍When to Choose Low NAV Funds?
- If the fund is new but has a promising strategy or sector with growth potential.
- If you want to enter early into a fund by taking slightly higher risks.
Illustration purpose only
✍Final Thoughts
NAV is not something to fear or overthink. It’s simply a valuation metric that helps you track your mutual fund investments smoothly.
Instead of judging a fund by its NAV, focus on returns, risk profile, investment style, fund manager experience, and long-term consistency.
Understanding NAV empowers you to make confident investment decisions—and that is what truly matters.
Before investing, always consult financal expert/ Distributor (click ๐) to evaluate:
- Fund performance
- Risk profile
- Your financial goals
- Fund manager’s credibility
So next time you are choosing between High NAV vs Low NAV mutual funds, don’t decide just by looking at NAV. The smart move is to pick the right fund, not just the one with “cheap” or “expensive” NAV.
๐Start small, grow big — because your future deserves more.
๐Free SIP guide for beginners.
๐For Query:Email at
sipthefuturewealth@gmail.com
๐Recommended
What is SIP(For beginners)
๐Best App to start with expert support
Comments
Post a Comment