Mutual fund NAV: What causes the difference in NAVs of mutual funds? | Value Research Mutual fund NAV history: If two funds were launched at the same time, how is their NAV different from one other?
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What causes the difference in NAVs of mutual funds?

If two funds were launched at the same time, how the NAV of one fund can be different from the other?

The net asset value (NAV) of a fund depends on the value of the underlying portfolio and the expenses charged by the fund. It is derived by adding the market value of all the securities in the portfolio, subtracting the expenses and then dividing by the number of outstanding mutual fund units. So a fund with a different portfolio is bound to have a different NAV.

For instance, let's take two funds - Aditya Birla Sun Life Flexi Cap Fund and Parag Parikh Flexi Cap Fund. Though the direct plans of both the funds were launched in 2013 within a gap of a few months, Aditya Birla Sun Life Flexi Cap Fund is a much older fund. Its regular plan was launched in the year 1998. It has a different portfolio, different expense ratio and different number of units to derive at the NAV. A direct and a regular plan of the same mutual fund scheme invest in the same portfolio of securities. The expense ratio is the only differentiating factor between both. Know the difference between the direct and regular plan of a fund.

Further, contrary to what many believe, NAV of a fund doesn't matter. Many people have a misconception that a fund with a lower NAV is cheap to buy. Or if two funds were launched at the same time, and the NAV of one fund is higher than the other after a few years, say five years, then the fund with a higher NAV has done better. But this is a misconception. NAV doesn't tell you whether a fund is cheap or expensive. It just reflects the current value of one unit of the portfolio.

It is the returns that matter. Returns are the proper and comparable measure of how a mutual fund scheme has performed.

Suggested read: What the NAV of a fund tells you?


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