4 Most Common Myths about Mutual Fund NAV (Net Asset Value) Busted | Learn With ETMONEY
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- Опубліковано 25 лип 2024
- As human beings, we are wired to check if there is any cost advantage in something that we are buying. So naturally, some investors apply the same logic to mutual funds as well. As a result, there are multiple myths around the price of a mutual fund unit, also known as NAV or Net Asset Value.
In this video, we will bust some of the most common myths related to the NAV of a mutual fund scheme and help you make better-informed decisions when it comes to investing in mutual
funds.
Topics covered:
00:00 Introduction
00:56 Net Asset Value
04:32 Myth 1: The NAV is the price
06:30 Myth 2: NFOs are cheaper since the NAV is just ₹10
08:02 Myth 3: Lower NAV = More Units = Better For You
09:51 Myth 4: Higher NAV indicates good performance
11:21 ETMONEY Opinion
The net asset value or NAV represents a fund’s per unit market value on a particular date. In other words, the NAV is the number at which investors can buy mutual fund units from an AMC and likewise sell units to an AMC on a particular date
How is a NAV calculated?
The NAV of a fund is the total asset value of the fund minus the expense ratio, which is then divided by the number of outstanding units in the fund
When is NAV calculated?
Now, since the market value of investments changes by the minute consequently and in an ideal world, the NAV too should be changing at a rapid pace. However, since it’s not possible or practical for the fund house to compute it in real-time .. a fund’s NAV is calculated and published at the end of every market day
👉 MYTH 1: THE NAV IS THE PRICE
The NAV is not the price of a fund. A more powerful variant of this misbelief is where some investors equate a NAV with the market price of shares .. often assuming that they both work on the same principle. But that’s not true
After all, the price of a share is nothing but the collective view of all market participants who buy and sell that stock at different prices. This makes the determination of a share price a classic demand and supply situation with a higher interest in a stock leading to a higher price in the stock exchanges. On the other hand, none of this matters when it comes to computing the NAV of a fund
And that’s because the forces of demand and supply don’t work in this case and one can buy or sell as many units of a fund at the given NAV without impacting the NAV in any way. Unlike a share, the NAV merely reflects the weighted average value of all stocks and other assets that are held in its portfolio and the growth in NAV is reflective of the fund manager’s skill in managing the portfolio through the ups & downs of the market
👉 MYTH 2: NFOs ARE CHEAPER SINCE THE NAV IS JUST ₹10
NFOs are cheaper than other schemes because the NAV is just 10 rupees. It really does not matter if a fund’s NAV is at 10 rupees or if it is at 100 rupees. When we invest in a mutual fund we invest for future returns .. and what really matters here is the growth in NAV and not the absolute value
Now, another related misconception is that funds with a higher NAV have already peaked and hence, offer a much lower scope for growth as compared to NFOs. As one can see, this flawed notion is promoted by some agents to gullible investors to make the NFO not only cheaper but also something that has a lot more upside attached to it.
👉 MYTH 3: LOWER NAV = MORE UNITS = BETTER FOR YOU
The lower the NAV .. the higher is the number of units, one would receive. But, it doesn’t matter.
The point is clear -- NAVs and units are the same sides of the coin .. and having a lower NAV or a higher number of units in isolation is not likely to have any consequence on your ability to generate wealth on your invested capital. What really matters is, how these funds grow in the future and the rate of return they are able to deliver to their unit holders.
👉 MYTH 4: HIGHER NAV INDICATES GOOD PERFORMANCE
The biggest argument made by misinformed investors or deceitful agents is that funds that have high NAVs are also the better performing funds.
👉 ETMONEY OPINION
1. The NAV is not the price and funds cannot and should not be compared on the basis of their NAV
2. The concept of a NAV and a share price is very different and definitely not comparable
3. An NFO is cheap at 10 rupees is nothing more than a trick
4. A lower NAV might give more units .. there is nothing to indicate that it is a better deal for the investor
5. a high NAV fund does not mean a better performing fund
👉 Resources:
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A super crisp video on what is NAV , the myths, the facts all clearly explained with stats and some solid research!! I seriously recommend every investor to go through all your videos before investing!! Thank🙏 you team ETMONEY!!!
Glad it was helpful! Much appreciated
Awesome presentation, clearly the speakers speaks with good quality in normal speed and with full confidence.. remarkable speaker 👍
Thank you for teaching in simple language with examples. One of my criteria to select a fund out of many similar funds was it's NAV. My thinking was to opt for a lower NAV fund to have more u it's and also "no much scope for a high NAV fund as it is saturated".
Thanks for educating and breaking this misconception
Again very insightful video, eagerly waiting for next week. Thanks team 👍
Our pleasure! We target releasing two videos every week, the next video should be live tomorrow. Thx for your kind appreciation
excellently articulated and hope investors will realise NAV is not price of the fund. I know someone didnot wanna invest in a fund as NAV is till he was explained on the ratios to show how his fund is performing. Thanks for wonderful presentation
Most welcome, Anand TS. It's remarkable how everyone (incl. me) have so many misplaced beliefs especially when it comes to finance. Glad you found it useful
Thank you for the good video. Sir.An insightful for everyone.
So nice of you. Thank you!
best possible educational video as always, thanks for such insightful information :)
Most welcome Amit Dani
Great detailed video as expected. Thank you again. One small question. If Market fall for one day only, what time should we add more funds to get more units at low NAV.
place order before 3 pm
Great video. Also make a video how a fund size could or could not affect future returns.
Thanks. In our research, we could not find a significant causality between fund size and performance.
So well explained
Thank you very much
sir,
u know what , just now i called a customer care of a mutual fund and i wanted to buy a simple index fund, she had totally midguided me and told me to check their another scheme which was having low NAV value (which had a higher expense ratio which could help the AMC company in getting more profit) , and then i just saw ur video and i got the point that the nav does'nt play an important role in selecting a mutual fund 😍😍 Thank you so much from the bottom of my heart.
Good and educational information as usual. Thank you so much 👌🤩
Most welcome, Sachin KN
Nice
Thank you
Most welcome
Thank you
You're welcome
Everything explained very beautifully. Still we would like to know which day's NAV we will get if we invest online in an Indian MF investing in global stock markets. Does our timing of online investment in Indian MF scheme investing in US stocks? If yes, how.
Thank you for sharing good information and educating us
Most welcome. Glad it is helpful
Thank you.
Most Welcome!
Exactly what I was looking for 😊
Happy to help
SEBI February rule on allotting units only after realisation of funds means units are allocated upto T+5 days considering bank delays, holidays, weekends, etc. This is bad rule for retail investors as AMC usually allot units on days when NAV is highest.
if you book order before 3pm.of market day you get NAV of that market day, even if it takes few days to process the order
@@ashutoshmadhwani2335 this is applicable to only lumpsum purchase orders. For SIP it always takes time to process bill payment only then next day applicable NAV based units are allotted.
@@gauravpande4228 I haven't come across this issue yet, my SIPs give me same day NAV. Either ways if you are long term player it shouldn't of big concern
Very good info . Could you please create a video how MF are taxed and mentioning in ITR with examples ?
We have many videos on mutual fund taxation. Pls check out this playlist and see which videos suit your requirement, thanks! ua-cam.com/video/aAb4DKbdBvg/v-deo.html
Dear sir, could you explain us, what is the benefit of a particular company, when it's share value is going up?
Sir how can we get same day nav in equity mf? Suppose if I transfer money through net banking before 11 am? Or I can keep money in liquid mf of same amc. Then I can transfer money from liquid scheme to equity scheme at 11 am.
Can we make monthly income from mutual funds , if yes could you please make video on types of funds and when to exit and when to enter ?
If two mutual funds for eg Tata digital fund and ICICI prudential technology fund are giving same return but there nav is different . which one to select?
Hey! Can you please make a video on smart deposit please not able to decide if I should go with it or not
Hello. We have explained SmartDeposit sufficiently on the app. Anything in particular you want to know about?
@@ETMONEY yes, mainly is it similar to a liquid fund? Or does it work on a different model?
I have heard people say that when the market is going down and we have started an SIP so during that time more units are allocated. While in growing market, less units are allocated. So if number of units is irrelevant then why this point comes up in discussion?
Can you please explain..How to get same day NAV for lumpsum investment? On what all factors it depends?
Pls check out the same day row (i.e. row 1 of the table) in 3:18 of this video
Although the NAV and share price of stocks are completely different, but if the market continues to under perform for some days at a stretch, how will the NAV of a mutual fund be affected?
Does aum affect nav ?
786 likes …. It’s considered very auspicious in My faith …. So I didn’t want to to hit another like …. But this is best Vedio on NAV …. May God be with u 🙏
Thank you very much!
Hai sir, As usual wide range of coverage 👍🏻. Will the size of the AUM affects the performance of a fund particularly in small and mid cap funds?? This statement also prevalent today. Is it true? Should we consider AUM size of particular fund while choosing one? Kindly clarify it sir.
Hi. We can't generalize this. Sometimes funds with a low AUM are seen ahead .. while on other occasions, its funds with a significantly high AUM that are category leaders. Like it is the case now - the top performing large cap, mid cap and small cap funds (i.e. last 1 year return) are schemes which are among the highest AUM. But this can change anytime so difficult to find causality between assets and performance.
@@ETMONEY Thank you team. How mutual funds buy shares? Through bulk/block deals??? Kindly make a video on back end process of MFs to get a fair idea. What happens to our money after SIP?
It will be very useful.
Nice video sir
Thx!
Thank you for sharing information
Our pleasure. Glad you found it useful
@@ETMONEY Can anyone please help me to Choose the right MF?
Goal: Vacation or tour (in next 3 years)
Which one to consider:
IPO based Equity or Special Situation or Large Cap equity or Nifty 50 equity or S&P Nifty 200 TRI.
What are the key indicators to choose the right funds?
Expert comments please 🙏
Thanks
GOD LEVEL
Thx
Good information
Thanks!
@@ETMONEY sir जी क्या कारण की sip की तारीख की nav नही मिल रही हैं
If I invest Rs 1 lakh around 11 am in an equity mutual fund I get same day nav. What if I invest Rs 3 lakh? Will I get same day nav? I mean 3 lakh in one equity scheme in one day (one order ). Is there any difference whether amount is less than 2 lakh or more than 2 lakh? 3 years ago amount less than 2 lakh and more than 2 lakh were treated differently. I am talking about getting same day nav.
Why NAV is high in some funds while it’s low in some? What factor decides that for the fund house?
You'll typically find a higher NAV number if the scheme has been there for long and/or the scheme has performed well. A new scheme that gets launched often starts at 10 rupees.
Good question
Why debts and liquid funds' NAV is Considerably high
Question : Growth MF neither give dividend nor extra share. If the underlying share gives Split/bonus/dividend then how investor get the benefit or they simply won't?
Growth plans in mutual funds reinvest the dividends into the fund
@@ETMONEY if they reinvest investor should get extra units equal to invested amount. Right?
@@SachinVerma_profile Nope, the NAV goes up. Pls circle back to what we explained in 01:20 of this video
❤️❤️❤️❤️
❤️
If I could have made Rs. 10,000 extra profit by investing in direct mutual funds instead of regular mutual fund (of same fund). Does that mean I paid that 10,000 to the middle men ?
The direct plan of a scheme has a lower expense ratio than a regular Plan as there is no distributor/agent involved. This saving in terms of distribution cost or commissions paid is added back to the returns of the scheme.
@@ETMONEY then is my doubt correct ?
@@Sandeesh_Srikantam yes
@@sartmeh1 TQ
Hello friends, I have currently only 3.5 lakh of principal remaining in mortgage loan(no tax benefits) and emi is 5k with 8 years remaining. Shall i continue with this. Or better to repay the principal quickly as i have surplus amount every month around 50k, now and market is also over valued.. or shall i increase the emi amount .. which option will be benificial.. pls advice.. thank you
I think paying off the mortgage and then doing SIP on share market will be good considering how overvalued the market is right now. SIP will help you fight the market trends. And when the market crashes you can put some lumpsum amount to buy many units at low price :)
@@kukukudoes458 thank u
Jack:
My age 26, I am planning to inverst for wealth creation long term
following mutual funds investment or am planning plz give me your point for my good growth
75% equity 25% debt
inside of 75% equity split to 50% active (53% large cap and 22% mid and small cap inverstment) 50% passive (53% nifty 50 and 22% nifty next 50)
inside of debt funds 12% for ppf + 8% for and 5% for liquid
all inversmet are under by 2 fund house
this plan works for long term
or simple i I'll inverst passive + debt
which is right way plz experience persons guide me
What is number of outstanding units ? Is there any cap ?
No
@@run.rahul.runitall how do we know the number of units then ?
@@paulalappatt Outstanding units are no. of units issued to holders in total. It changes daily. New units are added when people buy and units are reduced when people sell. So units change depend on how many bought and how many sold that day.
@@run.rahul.runitall okay.thank you
Why people running behind Low nav
Mfs
Great explanation sir..... thanks for your efforts......i am a beginner in investing and your videos are of great help.......one question sir.....say, for eg, UTI has a nifty 50 fund which is having NAV of around 116 INR, and axis nifty 50 fund is having NAV around 10 INR.......it is more likely that, both the funds track the same index, and invest in the same companies ( the top listed 50 companies)......so in this scenario, does the axis nifty 50 fund gives better returns in long term (due to its lower NAV) than the UTI nifty 50 fund????? In the video on myth 3, the comparison is done between two different large cap active funds.....does this holds the same for passive funds like the index funds???? Also, there may be a possibility that the 2 funds mentioned in the video may invest in different companies, and that may also be a reason for the difference in returns. Please share your thoughts on this sir.....thanks
Can u pls clarify why is huge difference in NAV of FoF and it's corresponding ETF, especially in cases where FOF has invested upto 99% in the ETF ( eg. Mirae Asset S&P 500 top 50)
I have never seen nav of any mutual fund.
Even if you say NAV is irrelevant in many ways...we only book profit on their bases. Or why should we invest in any MF at all... for the AMC do pay us interest on our money nor is their any cumulative interests involved ??
Lol
Hindi me bolo
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