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Oct 29, 2018 5 min read

Investing in High NAV or Low NAV is Good?

Read this blog to know whether you should invest in mutual funds during high NAV or Low NAV.

There are a number of things that are to be considered by the investors planning to invest in mutual funds. If one should really be worried about deciding whether to invest during high or low NAV is a question in itself. Mutual fund investment decisions are always really tricky and this proves to be the master of all. So here let’s begin with understanding what NAV is followed by the other situations and the decisions that one should take.

What Is NAV?

NAV or the Net Asset Value of a scheme refers to the price at which the units of the schemes can be purchased. It is calculated by deducting the value of liabilities from the value of the assets and dividing the same by the total number of outstanding shares. This is the price at which the units are distributed to the investors which are calculated by dividing the amount invested by the per unit price.


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Factors Responsible for Changes in NAV

Mutual fund investments are always subject to market risk, there is a reason behind why one sees this line floating around. Since market is always prone to fluctuations, the affect on a scheme is indicated through the changes in the NAV. This happens due to the rise and fall that happens in the price of the stocks in which the investment has been made. Currently, when the investment market has experienced a dip due to number of reasons such as rise in the oil prices, correction phase in mid cap and small cap space, weakened Asian market, FIIs withdrawing their investments, etc. These changes have led to the market downfall as a result of which schemes are available for investment at low NAV.

Investing When the NAV is High

High NAV means that less units will be added to the investors account. Whether or not the units purchased will lead to high returns depends on the selection and performance of the scheme. It may or may not rise higher, if it does, the investor is likely to earn well with time.

Investing When the NAV is Low

With the ongoing correction phase in the mid and small cap space and also with the other market changes, the NAV of the schemes have definitely hit low. This time is usually considered to be the golden opportunity for investment. Experts even advice additional purchase during this time so that when the market rise high again, the investors are able to make the maximum earnings.

Which Is the Better Situation?

When it is said that the high NAV will lead to less purchase of units while less NAV will lead to an increase in the number of units, it is applicable mainly in the case of lumpsum investment. As in terms of SIP investment, whether the NAV of a particular scheme is high or low, at the time of investment won’t matter. The reason is that with time, as a result of rupee cost averaging, the investors will be able to yield better overall returns. In case of NFO, don’t get swayed by low NAV as compared to the open ended schemes, as their performance history is not available and one cannot completely believe that it will generate higher returns in comparison. Which is the better situation depends on the number of factors such as the scheme’s performance, the fund manager, investment strategies followed, market affect, etc. At the end it all depends on how the fund performs, as an investor may earn well on the units purchased at high NAV and may even suffer loss on the ones with low NAV at the time of investment.


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Expert’s View

At MySIPonline, the experts believe that the investment should be made for long-term so that no matter what the NAV of the scheme was at the time of purchasing, the investor is able to earn well with time. If you wish to start investing in mutual funds, then you can do so through our platform that has a really simplified and easy investment procedure. If you have any query related to the regular funds, you can post the same here.

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