Investors may prefer schemes with a lower NAV than those with a higher NAV. They may prefer a scheme that is issuing units at Rs. 10 while existing schemes within the same category can be purchased at higher NAVs. Please note that mutual fund schemes have different NAVs. Investors should instead choose a mutual fund scheme that is based on its merit, such as the performance record, professional management, and so forth. Below is an example.
Let's say scheme A has a NAV Rs.15, and scheme B has a NAV Rs.90. Both schemes are equity-oriented diversified schemes. The investor has invested Rs. Each scheme would receive Rs. He would receive 600 units in scheme A (9000/15) and 100 units in scheme B (9000/90). If the markets rise by 10% and both schemes perform equally well, it will reflect in their NAVs. NAV for scheme A would rise to Rs. 16.50, and Rs. 99. The market value of investments would therefore be Rs. 9900 (600* 16.50), in scheme A, and Rs. 9900 in scheme B (100*99). Each scheme would yield a 10% return on investment. The factors that influence investment decisions include the NAV of the schemes, the allocation of units in a lower or higher amount, and the investor's willingness to invest more or less. If a new equity-oriented scheme is offered at Rs.10, and an existing scheme for Rs.10, the investor should not consider these factors when making investment decisions. The investor should not consider 90 as a factor in their decision-making process. The same applies to income-oriented or debt-oriented plans.
However, it is possible that a better-managed scheme with a higher NAV will yield higher returns than if the scheme is poorly managed but has a lower NAV. The same holds true for falls in NAVs. A well-managed scheme with a higher NAV will not be as successful as one that has a lower NAV. Investors should place more emphasis on the professional management of any scheme than the scheme's lower NAV. While he may be able to get more units for a lower NAV, the scheme might not yield higher returns if it is poorly managed.