Does NAV matter while investing in MF?

NAV (Net Asset Value) is nothing but the networth (assets minus liabilities) divided by the number of units outstanding. In short, NAV is the price you need to pay to buy a single unit of a mutual fund. But it is not prudent to treat mutual fund as stocks and NAV as stocks price. Stocks are raw material for mutual funds which buy and sell equities as per the objectives of the mutual funds. So treating mutual funds as stocks is not the right thing.

Let us take an example to understand why NAV does not matter while investing in mutual funds. Let us consider investing in two mutual funds named scheme A and scheme B which has NAV of Rs. 10 per unit and Rs. 11 per unit, respectively. So if you decide to invest Rs. 11,000 in each scheme you will get 1,100 units of scheme A and 1,000 units of scheme B. So if we assume that the NAV has gone up by 10 per cent i.e. Rs. 11 per unit for scheme A and 12.1 per unit of scheme B. The value of your investment for scheme A would be Rs. 12,100 (1,100 units x 11 NAV) and for scheme B would be Rs. 12,100 (1,000 units x 12.1 NAV).

So from the example, we can make out that despite different NAVs the investment value of both the schemes remained the same provided that both the schemes provide you 10 per cent returns. So looking at this scenario we may say that NAV of the mutual funds doesn’t matter. Mutual funds with cheaper NAV doesn’t mean they are good and the ones with higher NAV aren't bad. So one must not consider NAV while investing in mutual funds.