valuation
Price is not value
The rule
A small unit price or NAV does not mean cheap. What matters is the assets behind the unit, not the number printed on it.
Where it flips
But rejecting every new or low-NAV fund on principle is also wrong. Sometimes a new fund offers a truly new spread or a lower cost worth having. The ₹10 number is never the reason, but it is not an automatic no either.
Graham teaches us to keep price and value apart. This helps with the myth that a new fund at ₹10 NAV is cheaper than one at ₹100. A NAV is just the fund's assets divided by its units. The same money buys more units at a lower NAV, but the same claim on the same portfolio. If both funds own similar assets and both rise 5%, both investments rise 5% before cost. The low number made more units, not more value. Being drawn to a new fund because ₹10 feels affordable is the trap. The price on the unit is not the worth of what stands behind it.
A worked example
₹10,000 at a ₹10 NAV buys 1,000 units. At a ₹100 NAV it buys 100 units. After a 5% move in the portfolio, both are worth ₹10,500 before cost. The low NAV gave more units, not a cheaper claim on the assets. [illustrative]
How to spot it
- ·you read the assets behind the unit, not the unit's number
- ·you check an existing lower-cost option before any new fund
- ·you see NAV as accounting, not as cheapness
Benjamin Graham · The Intelligent Investor