What does the high NAV of a mutual fund say about its quality and should you invest? (2024)

High NAV mutual funds: As many as seven schemes in the ‘Equity’ category and one in the ‘Hybrid’ category have NAVs over Rs 1000.

The Net Asset Value (NAV) of several equity mutual fund schemes has crossed the Rs 800 mark. As many as seven schemes in the ‘Equity’ category and one in the ‘Hybrid’ category have NAVs of over Rs 1000. Also, four equity schemes have their NAVs between Rs 800 and Rs 1000, as per data on the website of the Association of Mutual Funds in India (AMFI) at the time of writing on June 26, 2023.

As NAVs of several funds have crossed Rs 800 and Rs 1000 levels, individual investors, especially those who have just started or are planning to start their investment journey, often have multiple queries in their minds, such as: should I invest in a high-NAV mutual fund scheme? or, what does the NAV of a fund say about its quality?

FE PF Desk recently got in touch with some personal finance experts to find the answers to the above queries. Read on to find out what they say.

What does the high NAV say about the quality of a fund?

Experts say that a high NAV doesn’t say much about the present quality of the fund, except its past performance or growth from the starting NAV, which is usually Rs 10.

“A high NAV simply reflects the growth of the fund from its starting NAV, which is usually Rs 10. The appreciation in NAV is simply a reflection of performance, albeit in absolute terms without any context on the time taken for such performance,” says Nirav Karkera, Head of Research at Fisdom.

“Considering past performance alone is a rather weak indicator of a fund’s quality, looking at performance without context on time period weakens the premise even further. A high NAV, in isolation, may not quite offer any meaningful insight into the quality of a fund,” he adds.

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Further, a high NAV doesn’t mean that a fund has beaten its benchmark index. It simply means that it has existed for a long time.

“A high NAV tells you that the fund has been around for a long time and has been appreciated well by investors. High NAV, however, does not mean that the fund has beaten its benchmark,” says Gaurav Rastogi, CEO & Founder of Kuvera.

However, a high NAV is still an indicator of the fund’s resilience across market cycles and its ability to manage and absorb shocks over the long term.

“A high NAV symbolizes vintage and resilience. For a fund to have reached a high NAV of 700, 800 or even 1,000, it would have had to survive multiple market cycles. This speaks highly about the fund’s risk management capabilities and its ability to absorb and manage shocks. So, in a sense, a high NAV is actually a ‘badge of honour’ for a fund that has survived long enough to reach that NAV,” says Aniruddha Bose, Chief Business Officer at FinEdge.

High-NAV Equity Mutual Funds

Mutual Funds	Direct	Regular
Franklin India Prima Fund	1,837.74	1,662.69
Nippon India Growth Fund	2,580.17	2,394.71
Aditya Birla Sun Life Flexi Cap Fund	1,309.62	1,191.55
Franklin India Flexi Cap Fund	1,152.81	1,052.34
HDFC Flexi Cap Fund	1,321.25	1,225.15
Franklin India Taxshield Fund	1,040.29	948.6523
Aditya Birla Sun Life MNC Fund	1,070.68	976.36
Aditya Birla Sun Life Equity Hybrid ’95 Fund	1,216.70	1,103.93
HDFC Top 100 Fund	853.432	798.822
Nippon India Vision Fund	961.7467	904.3777
Sundaram Mid Cap Fund	862.5781	803.772
HDFC Taxsaver Fund	929.749	871.91

Is it wise to invest in High-NAV funds?

Experts say NAV is simply the price of a mutual fund unit. A NAV’s utility is largely restricted to offering transparency and simplicity in ascertaining profit and losses on investments made into the fund. A higher or lower NAV in isolation offers no insight or basis to form a sound investment decision. There is no conclusion that can be derived from the fact that a fund’s NAV is higher or lower than another fund’s NAV, or a certain threshold.

Also Read: Should you invest in multi-cap or flexi-cap mutual funds?

“The high NAV simply indicates the performance of the fund from the starting NAV at launch, which is typically Rs 10. However, such computation of performance only offers insight into what the absolute return is, without any context on the time taken to deliver such a performance, which reduces the utility of such a performance metric,” says Karkera.

When to consider high NAV as a reason for investing

However, if one is attempting to base an investment decision basis the NAV, it would be a better approach to analyse the reason and story that led to the NAV reaching where it is. This approach should offer a stronger starting point to make an investment decision, according to Karkera.

Disclaimer: The views expressed in this article are that of the respective commentators. The facts and opinions expressed here do not reflect the views ofwww.financialexpress.com.Please consult your financial advisor before investing in mutual funds.