A ₹10 mutual fund looks cheap. It isn’t. Why NAV can fool investors — SkimNews
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- Dhirendra Kumar, founder and CEO of Value Research, argues that calling a mutual fund's NAV its "price" creates a car-shopping mental model, leading investors to compare funds by per-unit cost rather than portfolio quality.
- New fund offers (NFOs) almost always launch at ₹10 with no accounting or regulatory reason, while established same-category funds sit at ₹80 or ₹300 — making new funds look artificially cheap.
- A worked example: ₹5,000 invested in two identical portfolios — one with NAV ₹10, one with ₹500 — grows to ₹5,500 in both after a 10% market rise, proving only the portfolio's contents determine returns.
- Kumar notes NFOs cluster after market run-ups when new investors are flooding in, and frames the timing as a deliberate exploitation of the ₹10 illusion rather than coincidence.
- He identifies one honest exception: early international fund-of-funds products, which offered Indian investors access to foreign markets with proven track records — a scenario unavailable through existing domestic funds.
- Kumar sets a hard rule: any advisor recommending a fund because of its low NAV is misguiding the investor, with no exceptions — framing the belief itself as a reliable salesperson red flag.
Why it matters: Indian investors face a market flooded with new fund offers timed to peak enthusiasm, and Kumar's framework gives them one test: is the portfolio offering something no existing fund already provides? If not, the ₹10 price tag is a marketing tool, not a bargain — and trusting it can steer investors away from better-managed existing funds with longer track records.
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