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Buying Basis

NAV is not the right basis for choosing a fund

Suggest a diversified equity fund that has low net asset value (NAV) and also low risk for a new investor. Also, indicate a good growth fund.

First, a misconception must be clarified. And that is, one should never go for a fund which has a low NAV. If a fund’s NAV is Rs 10 and the other’s is Rs 30, the idea of choosing that fund which has a low NAV is wrong.

Look at it from a different perspective. If you invest Rs 5,000 in a fund whose NAV is Rs 10 and if you invest the same amount in another fund whose NAV is Rs 50. If both the funds react in the same way the NAV numbers will increase to Rs 20 and Rs 100 respectively - of both funds. Now both these aspects would depend on how these funds participate in the market rise. How does their portfolio do in comparison to the present day. There are many instances in which the NAV of funds have gone down maybe from Rs 10 to Rs 5. So, one should not go on the NAV of the fund. Look for the performance of the fund in the long term period and see whether, during the market downturn, the fund has been able to perform better in comparison to other funds?

Secondly, there are many good equity diversified funds. Assuming that you are looking for a long-term period, invest consistently. Here are three-four good funds to choose from:  Birla Sun Life Frontline Equity, DSP BlackRock Top 100, HDFC Top 200, Magnum Contra, and UTI Equity.

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