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Akash was excited. He had received a huge bonus at work, and today, he was finally going to put that bonus to good use by investing in mutual funds. He had spent a lot of time learning about the basics of mutual funds and carefully selected a mutual fund company to invest in. However, when he finally sat down to purchase some funds, he frowned in confusion. Some funds had higher NAVs, while others had lower NAVs. Puzzled about this, he wondered, \u201cWhich one should I go for? Should I buy a fund at higher NAV or opt for one with lower NAV?\u201d <\/p>\n\n\n\n
Akash is not alone in this dilemma. Many first-time investors often find themselves at these crossroads before making their initial mutual fund purchase. If you belong to the category of new investors, you may first need to understand what the NAV is all about before making an investment decision. So, let\u2019s first take a closer look at what NAV is before we head on to resolve Akash\u2019s (and perhaps your) dilemma of buying mutual funds at lower NAV vs. at higher NAV.<\/p>\n\n\n\n
A mutual fund consists of several units, also known as unit shares. The Net Asset Value<\/a> of each such unit is simply its market value. In other words, it is the price at which you buy or sell the units of a mutual fund. When you invest in a mutual fund, you\u2019ll find that there are many assets that are managed under that fund.<\/p>\n\n\n\n Formula for calculating NAV: <\/strong>The total net assets of this fund will be calculated using this formula:<\/p>\n\n\n\n Net assets = (The current market value of all the assets that the fund has invested in) \u2013 (The liabilities and expenses incurred by the fund)<\/strong><\/p>\n\n\n\n Now that you know the net assets of the fund, you can easily calculate the Net Asset Value of each unit with this formula:<\/p>\n\n\n\n Net Asset Value<\/strong> = Net assets of the fund \u00f7 (The number of units in the fund)<\/p>\n\n\n\n To make this concept clearer, let\u2019s take a look at another example.<\/p>\n\n\n\n Example:<\/strong> Say you invest in a mutual fund that has securities with a market value of Rs. 100 lakhs. If this mutual fund issues 10 lakh units to its investors, the NAV per unit of the fund will be Rs. 10.<\/p>\n\n\n\n Akash knew all about NAVs. He also knew that since the value of the securities in a mutual fund are subject to frequent changes, the NAV of mutual funds is calculated on a daily basis. The NAVs of the units in some funds may be higher than the NAVs of the units in other funds.<\/p>\n\n\n\n The question that was nagging him was this: Should he buy mutual funds<\/a> at lower NAVs or at higher NAVs?<\/p>\n\n\n\n Lower NAVs could mean any one of many things. A fund with a higher number of units would have lower NAVs. So, if Akash chose to buy mutual funds at lower NAVs, he would get more units to invest in. This is one reason that many new investors believe funds with lower NAVs are the better option to invest in. However, having more units in your portfolio does not necessarily mean that you will enjoy higher returns down the line.<\/p>\n\n\n\n Benefits: <\/strong>Here are some of the benefits of buying mutual funds at a lower NAV-<\/p>\n\n\n\n Given below is a list of top 10 mutual funds with low NAV and high returns <\/strong>that you can invest in:<\/p>\n\n\n\n <\/p>\n\n\n\nShould you Buy Mutual Funds at\u00a0Lower NAVs\u00a0or at\u00a0Higher NAVs?<\/strong><\/h2>\n\n\n\n
Buying Mutual Funds at Lower NAVs<\/strong><\/h2>\n\n\n\n
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