Why It Sounds Convincing
A mutual fund at ₹10 per unit can look like a bargain next to one at ₹200. But buying more units doesn't automatically mean getting a better deal.
The Missing Context
A fund's NAV is simply the value of one unit. Suppose you put ₹10,000 into one fund at ₹10 per unit and the same amount into another at ₹200 per unit. You'll receive a different number of units, but that alone changes nothing about your return. If both funds grow by 10% after costs, both investments become ₹11,000. New Fund Offers, or NFOs, commonly start at ₹10 per unit because they're new, not because they're discounted. The new scheme won't yet have its own performance history, although its manager or investment approach may have a history you can examine. What matters is where your money is invested and how the fund is managed.
Check Before You Believe It
Look at the fund's investment approach, holdings where available, costs and risks. Ask whether a new fund offers something you actually need that existing funds don't. Ignore the temptation to judge it by the number of units you get.
Quick Takeaway
A lower NAV gives you more units, not necessarily more value.