NAV Riddle | Value Research The NAV of Magnum Contra Fund is just around Rs 29. It is a seven-year old fund and as per your website, its five-year returns stand at over 50 per cent. How can this fund have such a low NAV despite these kind of returns?-Preeti Talwar
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NAV Riddle

The NAV of Magnum Contra Fund is just around Rs 29. It is a seven-year old fund and as per your website, its five-year returns stand at over 50 per cent. How can this fund have such a low NAV despite these kind of returns?
-Preeti Talwar

I find it very strange that the NAV of Magnum Contra Fund is just around Rs 29. If we look at its returns it has done very well. It is a seven-year old fund and as per your website, its five-year returns stand at over 50 per cent. How can this fund have such a low NAV despite these kind of returns? In contrast to this, many other funds have NAV well over Rs 100
-Preeti Talwar

Magnum Contra Fund introduced the growth option very recently on May 9, 2005. Prior to that, it had only the dividend option. The fund has declared five dividends till now, and all of them have come during 2003 and 2004. As and when a dividend is declared, the NAV falls by the amount of the dividend. Due to this, the fund's NAV has not grown as phenomenally as some of the other funds, despite the fact that it has generated good returns.

In contrast to Magnum Contra, many other funds have the growth option since long, and hence, their NAVs have grown as a result of the accumulation of the gains registered over the period of time.

In any case, that should not bother your because the NAV of a fund is immaterial while making an investment decision. It is a myth that low NAV means cheaper units and hence a good opportunity to invest. Investment decisions in case of a mutual fund should be guided by factors other than its NAV.


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