{"id":31727,"date":"2023-09-30T06:57:13","date_gmt":"2023-09-30T06:57:13","guid":{"rendered":"https:\/\/prevalentindia.in\/index.php\/2023\/09\/30\/why-you-shouldnt-rely-on-nav-when-selecting-mutual-funds\/"},"modified":"2023-09-30T06:57:13","modified_gmt":"2023-09-30T06:57:13","slug":"why-you-shouldnt-rely-on-nav-when-selecting-mutual-funds","status":"publish","type":"post","link":"https:\/\/prevalentindia.in\/index.php\/2023\/09\/30\/why-you-shouldnt-rely-on-nav-when-selecting-mutual-funds\/","title":{"rendered":"Why You Shouldn\u2019t Rely on NAV When Selecting Mutual Funds"},"content":{"rendered":"
\"\"<\/div>\n

New Delhi (India), September 30<\/strong>: NAV stands for Net Asset Value, which refers to the cost of a single mutual fund unit. It’s like a label that indicates the value of one unit of a mutual fund at a specific moment.
Mutual funds<\/a> gather investments from people like us and channel them into different assets such as bonds, stocks, etc. The NAV reflects all the assets owned by a mutual fund.<\/p>\n

<\/a>Misconceptions about NAV<\/h4>\n
    \n
  1. Lower NAV means cheaper, right?<\/strong> Wrong. A common misconception is that a mutual fund with a lower NAV is cheaper and, hence, a better investment.\n

    This is not true. A mutual fund’s NAV reflects its assets’ current value. An older fund might have a higher NAV than a newer one, but more is needed to make the newer one a better choice.<\/li>\n

  2. Higher NAV means better performance, right?<\/strong> Again, wrong. A higher NAV doesn’t necessarily mean the fund has performed better. It might just be older.<\/li>\n<\/ol>\n

    <\/a>Why NAV Shouldn’t Be Your Go-To Metric<\/h4>\n
      \n
    1. NAV Doesn’t Determine Fund Performance\n

      <\/strong>Let’s take an example. Consider two mutual funds: HDFC Nifty 50 Mutual Fund (Fund A) with a NAV of \u20b920 and IDFC Sensex Mutual Fund (Fund B) with a NAV of \u20b950.<\/p>\n

      If both funds have 20% of their assets in a particular company’s shares and these shares rise by 10%, the NAV of both funds will increase by 2%.<\/p>\n

      So, Fund A’s NAV becomes \u20b920.4, and Fund B’s becomes \u20b951. While it might seem like Fund B’s NAV increased more, the percentage growth is the same for both.<\/p>\n<\/li>\n

    2. NAV is Not Influenced by Demand and Supply<\/strong><\/li>\n<\/ol>\n

      A mutual fund’s Net Asset Value (NAV) does not provide information regarding the valuation of the stocks in its portfolio.<\/p>\n

      It is possible for a newly established fund to invest in overvalued stocks and still have a low NAV, while an older fund might invest in undervalued stocks and have a higher NAV.<\/p>\n

        \n
      1. NAV Doesn’t Reflect Underlying Asset Value<\/strong><\/li>\n<\/ol>\n

        A mutual fund’s Net Asset Value (NAV) does not provide information regarding the valuation of the stocks in its portfolio.<\/p>\n

        It is possible for a newly established fund to invest in overvalued stocks and still have a low NAV, while an older fund might invest in undervalued stocks and have a higher NAV.<\/p>\n

          \n
        1. Focusing on NAV Can Lead to Wrong Decisions<\/strong><\/li>\n<\/ol>\n

          Considering more than just the NAV when evaluating mutual funds is essential. Solely relying on this metric could lead to selling a fund performing well or holding onto one underperforming.<\/p>\n

          Keep in mind that mutual funds are designed for long-term growth. You could miss significant long-term gains if you only focus on short-term NAV fluctuations.<\/p>\n

          <\/a>What Should You Look At Instead?<\/h4>\n
            \n
          1. Fund Manager’s Track Record<\/strong>: A fund manager’s past performance can give you an idea of their investment strategy and how well they can navigate market ups and downs.<\/li>\n
          2. Fund’s Historical Performance<\/strong>: While past performance isn’t an indicator of future results, it can give you an idea of how the fund has done over the years.<\/li>\n
          3. Fund’s Investment Strategy<\/strong>: Does the fund invest in large-cap stocks? Small-cap? Bonds? Understanding this can help you determine if the fund fits your investment goals.<\/li>\n
          4. Expense Ratio<\/strong>: This is the fee you pay to the fund manager. A higher expense ratio can eat into your returns.<\/li>\n
          5. AUM (Assets Under Management)<\/strong>: This represents the total assets the mutual fund controls. A larger AUM can indicate trustworthiness and stability.<\/li>\n<\/ol>\n

            <\/a>Conclusion<\/h4>\n

            Although NAV is an essential measure in the mutual fund industry, it should not be the only factor to base your decision on when selecting a fund.<\/p>\n

            Taking a comprehensive approach, considering additional metrics, and making a well-informed choice is essential. Remember, mutual funds require a long-term strategy, and making intelligent decisions is crucial.<\/p>\n

            If you have any objection to this press release content, kindly contact pr.error.rectification@gmail.com to notify us. We will respond and rectify the situation in the next 24 hours.<\/p>\n","protected":false},"excerpt":{"rendered":"

            New Delhi (India), September 30: NAV stands for Net Asset Value, which refers to the cost of a<\/p>\n","protected":false},"author":1,"featured_media":31728,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[575],"class_list":["post-31727","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-news","tag-business"],"_links":{"self":[{"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/posts\/31727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/comments?post=31727"}],"version-history":[{"count":0,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/posts\/31727\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/media\/31728"}],"wp:attachment":[{"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/media?parent=31727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/categories?post=31727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prevalentindia.in\/index.php\/wp-json\/wp\/v2\/tags?post=31727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}