Published: 09th Sep 2024
By: Value Research
Distributors try to lure investors into investing in NFOs (new fund offers), claiming that they have a low NAV and thus would offer better returns. However, that’s far from true. Swipe to know why.
Imagine you invest Rs 5,000 each in two funds: Fund A, which has an NAV of Rs 50, and Fund B, a newly launched fund with an NAV of Rs 10. Assume both funds appreciate 10% in a year.
The 500 units you bought at Rs 10 each would now be worth Rs 11 per unit, totaling Rs 5,500. Similarly, the 100 units bought at Rs 50 each would rise to Rs 55 per unit, also reaching Rs 5,500. This shows that your returns are driven by the percentage increase in NAV, not the starting value of the NAV itself.
While a high NAV does not mean lower returns, it may adversely affect you. To find out how, read the full story by clicking the link below.