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Why are MF Units in Fractions?

I have invested Rs 5,000 in an equity fund, at an NAV of Rs 17.91. The fund house has issued 279.155 units to me. My worry is that is it okay to accept units in fractions? Do all AMCs do this or is mine an exception?

I have invested Rs 5,000 in an equity fund, at an NAV of Rs 17.91. The fund house has issued 279.155 units to me. My worry is that is it okay to accept units in fractions? Do all AMCs do this or is mine an exception?
Chiranjib Saikia, via e-mail

Don't worry, your investment is perfectly alright and nothing is wrong with it. When you invested in the fund, the NAV was Rs 17.91 per unit, which means that the price of each unit is Rs 17.91. So, if you invest Rs 5,000 you will have to divide that amount by the per unit cost to know how many units you will get—which is a fractional number of units. The number of units one receives can also be a whole number, say, if you invested Rs 5,000 at an NAV of Rs 20, you would get 250 units.

However, it should be of least interest to you whether the units are in whole number or a fraction since all units are issued in electronic, and not in physical, form. This means that when you sell (or buy) units you can dispose off (or purchase) these 'fractional' units also.

Although there is no hard-and-fast rule about the allotment of units, usually funds allot units up to three decimal places. And while we are discussing decimals, let us remind you that market regulator, the Securities & Exchange Board of India's guidelines stipulate that equity funds must disclose NAV at least upto two decimal places for all funds, and upto four decimal places for debt funds.


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