How to Select the Best Mutual Fund Scheme?

If schemes in the same category of different mutual funds are available shouldn’t investors choose a scheme with lower NAV?

Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity-oriented schemes. The investor has put rupees nine thousand in each of these schemes. He would get six hundred units nine thousand divided by fifteen in scheme A and hundred units ie. nine thousand divided by nine in scheme B. Assuming that the NAV of both the schemes goes up by ten per cent. The NAV of scheme A would go up to Rupees sixteen point five and that of scheme B to rupees ninety-nine. Thus the market value of investments would be rupees nine thousand nine hundred that is hundred into ninety-nine. The investor would get the same return of ten per cent on his investment in each of the schemes.

Thus lower or higher NAV of the schemes and allotment of the higher or lower number of units within the amount an investor is willing to invest should not be the factors for making investment decisions. On the other hand, it’s likely that the better-managed scheme with a higher NAV may give higher returns compared to a scheme which is available at a lower NAV But is not managed efficiently, therefore, the investor should give more weightage to the professional management of the scheme and its performance track record Instead of lower NAV. He may get a higher number of units at a lower NAV but the scheme may not give higher returns if it’s not managed efficiently.

Mutual fund investments are subject to market risks read all scheme related documents and information carefully before investing