5 Replies to “in the MF investment case which factor would be to watch for best company. NAV or RETURN history?”

  1. In a mutual fund, the NAV, which is the price of a unit of a fund, is irrelevant while making an investment decision. This NAV is totally dependent on the companies whose shares the fund has bought and their share price. So it depends on current state of the market.
    So, go by the returns it has given and see the portfolio it has. Analysis of portfolio is always needed.
    Let’s say NFO for a company has its units for Rs 10. Another fund has its units going for Rs 20.

    Both have invested in the same companies in the same proportion. When share prices rise, NAVs will rise proportionately.

    If both rise by 10%, Rs 10 will become Rs 11 and Rs 20 will become Rs 22.
    So, go by performance not by NAV.

  2. BOTH. NAV AND RETURNS. Returns History is for the purpose of understanding the past performance of the fund. Based on such performance, the decision of investment can be made.

  3. Return history or long term performance record is what is important to consider while making any investment in a Mutual Fund. What matters is if the Rs.5000 invested has become Rs. 6000 in a year, or a return of 20%! Does not matter whether the NAV was Rs.10 ( you would have got 500 units) or NAV Rs. 100 ( 50 units).

    It is also equally important to consider the risk/return ratings of the fund. Some fund managers may adopt more aggressive mechanisms in moving in and out of momentum stocks. Do the returns achieved by the fund manager justify the kind of risks taken?? Does it qualify therefore to be in a 5-star rated category of mutual funds?Fortunately all these are statistically measurable, and there is a stellar website,
    ValueResearchOnline which has been rendering this service for a number of years. Its independent, unbiased reporting has earned the respect of everyone in the industry and is quoted widely in the financial media.

    For example, read the following analysis of HDFC Prudence

    and this excellent article on the importance of risk/return atings and the methodology adopted for a fund being judged in the 5-Star category http://www.valueresearchonline.com/fundrating.asp

  4. Current NAV will represent the current price of the MF. It may be lower or higher depending on when the last dividend was declared in this fund.

    If you have to track the mutual fund, then you have to look into the return history of the fund.
    But beware that the past performance does not guarantee the future prospects of equity based mutual funds.

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