3 Replies to “Why do mutual fund NAVs go down when the market is down? what does fund manager do? & why cant they speculate?”

  1. The trick is not to look strictly at the NAV, but compare the NAV against the S&P index or similar index (the Dow isn’t really broad enough). If the NAV goes down less than the index percentage-wise, then they manager is doing his/her job. If it goes down more, then either the manager guessed wrong or just isn’t doing their job.

    Fund managers speculate every day, but many funds are targeted at specific sectors or types of stock (small, medium, large cap, tech industry, etc.), which limits what they can buy and sell.

    Since mutual funds invest in stocks in the market, it stands to reason that when the market is down, the NAV is down and vice-versa – as mentioned, one needs to look at how the manager does against the market and not in absolute terms.

  2. Dude…let me tell u that Stock Market is a very risky business.

    No one can predict the TREND of the market with CERTAINITY.

    Though a particular scrip or Index might be Fundamental, it may go down, given the fact, that there a some Market players who indulge in Short selling. There are also, many factors affecting the trend like FIIs OUTFLOW, Liquidity Squeeze, Inflation, Rupee Factor, Tight Monetary policies etc.

    The Thumb rule says that Mutual Fund NAV is directly proportional to Stock market.

    Hope this clarifies ur query.

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