NAV matters a lot every investment. No matter what types of share you sell & what you buy, it matters a lot. It helps in identifying the scheme performance of any mutual fund, the market values of any schemes invested in a market are known as NAV.
Net asset value varies from day to day because of the market values securities vary from day to day. The total no. of units of any scheme is divided by the market value securities. It is also called ‘book value’. The only thing matter in investment is the portfolio of yours in a long-run with a profitable return.
Net assets values misconception
Two different Funds of the same value are none but the same, NAV does not matter here, and it’s materialistic. People often carry this type of perception; here they used to assume that the Mutual fund NAV meaning is similar to the market price of any equity share, however, it is not a truth.
For example, if a mutual fund at Rs20 is cheaper than that of the other fund of 110rs or Rs150 is better or vice versa, this idea of thinking is really bad for an investor, this fact should be learned 1st thus it becomes the better off for any new investor.
Price value of any equity share Vs. Net Asset Value (NAV)
A Share of a particular company is the price is always quoted and mentioned on the stock exchange, apart from the present situation their value depends on the future investments and performances considering the supply chain in a loop. This leads to the market price (M.P) different from the booking value.
Talking about the mutual fund there are no such things in it. The logic behind the MF is far different from the share marketing. Here you cannot find any concept of the market value. Thus there are no such things of a lower or higher price. Here performance from the past years matters along with the returns.
Impacts of NAV on the returns
Investor often thinks of that a low NAV gives a better performance with better returns. This is all about the misconception behind NAV. It is the quality and the past performance of a fund that makes it different returns. For example
If you have 100rs and want to invest but confused with the two different options, these two options have an X NAV value of 1rs and other Y NAV value of 5rs. After purchase, you will get 100 units of X and 20 units of Y. Both fund shares the same growing profile say it by 25%.
Then after one year, the return price of X will be Rs 1.25 and fund Y it will be 6.25 Rs. Therefore the total value for 100units x 1.25= 125rs for X and for Y it will be 20units x 6.25rs= 125rs. As you can find the return amount is the same for both the mutual funds thus it makes clear that NAV is irrespective to MF.
The better performance of any mutual fund makes a good return. Hence, NAV affects the performance of MF.