An equity fund can give zero returns on certain days because the NAV is affected by the price movements of the stocks in its portfolio
03-Jan-2015 •Research Desk
I am new investor and have invested in several funds beginning this year including ICICI Pru Balanced Advantage Reg-G and ICICI Pru Value Series 5 Reg-D. I am keeping a daily watch on my investments. I was surprised yesterday that these two funds practically delivered zero returns for the day. How is it possible for funds to deliver exact zero return when they are investing in multiple sectors and companies?
- Rahil Kasimi
Mutual funds, especially equity funds, are meant to be 4-5 year vehicles. They are meant to simplify investing and save the time you spend on monitoring your money. Tracking their returns every day and reacting to this is not a good idea. Tracking it once in a while would be better. We don't have the date of your investment. But assuming you made your investment in ICICI Pru Balanced Advantage Regular on January 1, 2014 and ICICI Pru Value Series 5 Reg-D on 11th September 2014, the year to date returns of ICICI Balanced Advantage is 27.64 per cent and ICICI Pru Value Series 5 has given 8.37 per cent return since launch. Neither is a bad performance.
Yes, a fund can give zero returns on certain days because the NAV is affected by the price movements of the many stocks in the portfolio. If some stocks rise, and others fall, cancelling out each other, the NAV may remain unchanged. The expense ratio can also impact the NAV. Just like the market can close at a high, a low or even stay flat on certain days, it is possible for these funds to deliver zero daily returns if there is no significant change in their portfolio. That does not make these funds unfit for investment.