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Why do different index funds tracking the same index have varying NAVs? Shouldn't they be the same since their compositions are identical? - Anonymous
The NAV of index funds can vary because different funds begin at different times. For example, an index fund launched in 2000 has had more time to grow with market fluctuations compared to a fund launched in 2022, resulting in a higher NAV for the older fund. However, the actual NAV value is not as significant as the fund's performance relative to the index. Whether the NAV is Rs 10 or Rs 100, your returns will grow in proportion to the index's movement.
The key factor to focus on is the percentage change in the index, not the absolute value of the NAV. If an index like Sensex rises by 10 per cent, both the Rs 10 and Rs 100 NAV funds should appreciate by approximately 10 per cent as well. Therefore, regardless of the starting NAV, your investment will perform in line with the index over time. The NAV only reflects the fund's historical journey but does not indicate its future performance or potential returns.
Also watch: How to use index funds in your portfolio?
This article was originally published on September 24, 2024.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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