Mutual Fund NAV vs Returns: The Real Secret to Wealth Creation

When investing in mutual funds, many people fall into the trap of focusing on the mutual fund NAV (Net Asset Value). A lower NAV might seem like a better deal, but in reality, NAV is just a number. What truly matters is the percentage return—the growth of your investment.

Let’s simplify this with an example:

• Fund A: NAV ₹20 → ₹22 (Growth: ₹2)

• Fund B: NAV ₹100 → ₹110 (Growth: ₹10)

At first glance, Fund B’s ₹10 growth might seem more impressive than Fund A’s ₹2 growth. However, when you calculate the percentage return, both funds grew by 10%.

This shows that the NAV value has no impact on how much your investment grows. Whether the NAV starts at ₹20 or ₹100, what you earn depends on the fund’s growth.

Why Investors Should Ignore the NAV

NAV simply reflects the price per unit of a mutual fund. It’s calculated by dividing the total value of the fund’s assets by the number of units.

For example, a fund with assets worth ₹1,000 crore and 100 crore units will have a NAV of ₹10. If the assets grow to ₹1,200 crore, the NAV becomes ₹12.

But if the fund had only 10 crore units, the NAV would start at ₹100 and rise to ₹120. The growth is still the same: 20%.

This is why the NAV value itself doesn’t indicate whether a fund is cheap or expensive. The focus should always be on the percentage return and the fund’s ability to achieve your financial goals.

As John C. Bogle said in “Common Sense on Mutual Funds”: “The real measure of a mutual fund is its performance over time, not its price per unit.”

The Importance of Expert Guidance

While understanding NAV and returns is essential, making the right investment choices often requires professional expertise. This is where a mutual fund distributor becomes invaluable.

A good distributor doesn’t just recommend funds—they help you:

1. Focus on Goals, Not Distractions

Many investors waste time comparing NAVs instead of evaluating a fund’s performance. Distributors guide you to focus on the metrics that truly matter.

2. Choose the Right Funds

With thousands of funds available, selecting the right one for your needs can be overwhelming. Distributors simplify this process by recommending funds based on your goals, risk tolerance, and investment horizon.

3. Stay Disciplined

As Peter Lynch pointed out in “One Up on Wall Street”: “The most important organ in investing isn’t the brain—it’s the stomach.”

A distributor helps you stay invested during market volatility, ensuring you don’t miss out on long-term growth.

The Takeaway

The NAV of a mutual fund doesn’t determine how much you’ll earn—the percentage return does. Whether you invest in a fund with a NAV of ₹20 or ₹100, your wealth depends on the growth rate of the fund.

However, understanding these concepts is only half the battle. To achieve true financial success, you need the right guidance. A mutual fund distributor ensures you make informed decisions, stay disciplined, and build a portfolio that aligns with your goals.

As Warren Buffett wisely said: “Risk comes from not knowing what you’re doing.”

With the right distributor by your side, you can confidently navigate the world of mutual funds and achieve your wealth-creation goals.