Published: 21st Aug 2024
By: Value Research
Typically, direct plans of mutual funds have a higher NAV (net asset value) compared to regular plans. This leaves investors in a dilemma – is it better to go for regular plans over direct plans?
A low NAV indicates a higher number of units held, while a higher NAV indicates a lower number of units held. However, it’s immaterial how high or low a fund’s NAV is.
Let’s suppose Fund A has an NAV of Rs 10, while Fund B has an NAV of Rs 20. Assuming you invest Rs 1,000 each in these funds, you would receive 100 units of Fund A and 50 units of Fund B. If the funds grow by 10% after a year, both investments will increase by Rs 100. (100*11= Rs 1,100 for Fund A and 50*22= Rs 1,100 for Fund B). Hence, NAVs make no difference here.
It is the returns from the fund’s underlying stocks that matter. In other words, you should look at a fund’s performance, not NAV, when deciding to invest.
Though NAV may not dictate a fund’s performance, there are occasions when a high NAV isn’t ideal. To find out how, read the complete story by heading to the link below.