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Balanced Advantage Funds: Striking a Balance Between Risk and Return

Balanced Advantage Funds (BAFs) have become a popular investment choice, especially with the recent launch of the Canara Robeco Balanced Advantage Fund. Here’s an in-depth look at what BAFs are, their benefits, and their drawbacks.

What Are Balanced Advantage Funds?

Balanced Advantage Funds (BAFs) are hybrid mutual funds that blend investments in equity (stocks) and debt (bonds). They may also allocate to other asset classes such as real estate or gold, albeit in smaller proportions. Unlike conventional hybrid funds that maintain a fixed ratio of equity and debt, BAFs adopt a dynamic strategy. Fund managers actively modify the allocation between equity and debt according to their evaluation of prevailing market conditions.

Key Features of BAFs

1. Dynamic Asset Allocation: BAFs employ a flexible approach, adjusting their equity and debt allocation based on market conditions. This is different from traditional hybrid funds, which stick to a fixed allocation.

 

2. Regulatory Flexibility: The Securities and Exchange Board of India (SEBI) allows BAFs to allocate anywhere between 0% to 100% of their portfolio in equity and debt, giving fund managers the ability to be more tactical.

 

3. Moderate Equity Allocation: Typically, BAFs maintain a moderate equity allocation (approximately 60-70%) to balance growth potential with reduced risk compared to pure equity funds. The remaining portion is invested in debt instruments for stability.

Benefits of Investing in BAFs

1. Lower Volatility: By dynamically adjusting between equities and debt, BAFs aim to reduce volatility compared to pure equity funds. This can provide a smoother investment journey and potentially mitigate downside risk during market downturns.

 

2. Growth Potential: The equity allocation in BAFs retains the potential for growth. Fund managers can increase equity exposure during favorable market conditions to capitalize on potential gains.

 

3. Diversification: BAFs provide natural diversification by investing across equity and debt, spreading risk across various asset classes and reducing the impact of underperformance in any single asset class.

 

4. Tax Efficiency: Depending on their equity allocation, BAFs can offer tax advantages. Funds with a higher equity allocation (above 65%) can benefit from lower long-term capital gains tax rates on equity holdings, while those with a bias towards debt can leverage indexation benefits.

 

5. Suitability for Different Risk Profiles: BAFs can accommodate investors with moderate risk tolerance who seek a blend of growth potential and stability.

Drawbacks of Investing in BAFs

1. Market Timing Risk: The success of BAFs hinges significantly on the fund manager’s ability to predict market movements accurately. Poor timing can result in missed opportunities or increased losses.

 

2. Reduced Potential Returns: BAFs may offer lower overall returns compared to pure equity funds due to their allocation to debt, which generally provides less growth potential.

 

3. Higher Costs: BAFs are actively managed, leading to higher fees compared to passively managed index funds. These fees can reduce overall returns over the long term.

 

4. Complexity: Understanding the investment model and strategy employed by a BAF can be more complex compared to straightforward equity or debt funds.

Conclusion

Balanced Advantage Funds can be a valuable tool for investors looking to strike a balance between risk and return. Their dynamic allocation strategy aims to provide stability and growth potential, making them suitable for conservative investors and those with moderate risk tolerance.

 

 However, Potential investors should be aware of the risks and costs associated with BAFs and consider consulting a Financial advisor to ensure alignment with their investment objectives and risk tolerance.

Which is Better Investment: PPF or Mutual Fund

Low risk, High returns, Tax savings, and Portfolio liquidity are some of the most common things investors expect from their investments. Public Provident Funds (PPF) and Mutual Funds effectively fulfill these requirements. But which one is better than the other? Read this post to find out.

The investment options in India are now as diverse as the nation is known to be. While the investment objective of every investor can be different, most people generally look out for options that have minimum risk and high return potential. Tax savings and portfolio diversification are two other common expectations. While there are plenty of options that do fulfill these criteria, PPF and Mutual Funds are currently two of the most popular.

 

Let us have a look at what are Mutual Funds and PPFs and some crucial factors that can help you decide between these two:

1. Investment Risk

 

PPF: PPF is a government-backed savings scheme that offers a fixed annual interest rate, making it a very low-risk investment. The interest rate is set by the Central Government annually, ensuring that your investment remains safe.

 

Mutual Funds: These are managed by Asset Management Companies (AMCs) and involve pooling money from multiple investors to invest in various securities. Mutual Funds can potentially offer higher returns than PPFs, but they come with higher risk as the returns depend on market performance.

 

2. Returns Potential

 

PPF: The annual interest rate for PPF is generally around 8%. The returns are fixed and guaranteed, making it a safe choice for risk-averse investors.

 

Mutual Funds: The returns on Mutual Funds vary widely. Liquid funds may offer returns between 7% – 9% per annum, while equity funds can provide 10% – 15% or even more. However, these returns are not guaranteed and can fluctuate based on market conditions.

3. Investment Duration

 

PPF: PPF has a minimum investment duration of 15 years, with the option to extend in blocks of 5 years. This long tenure makes it suitable for long-term savings goals.

 

Mutual Funds: These do not have a fixed tenure. You can invest for as short as six months or as long as you prefer, providing flexibility to meet different investment objectives.

4. Tax Savings

 

PPF: Investments in PPF are tax-free up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act. The returns generated are also tax-exempt.

 

Mutual Funds: Equity-Linked Savings Scheme (ELSS) is a type of Mutual Fund that offers tax exemptions up to Rs 1.5 lakh per year under Section 80C. Other Mutual Funds are taxed based on the type and duration of the investment.

5. Portfolio Diversification

 

PPF: Investments in PPF are primarily in fixed-return instruments, limiting the scope for diversification.

 

Mutual Funds: One of the key benefits of Mutual Funds is portfolio diversification. You can choose from various types of funds that invest in a range of securities, allowing you to tailor your investment to your specific needs and risk tolerance.

 

Conclusion

 

Both PPF and Mutual Funds have their unique advantages. If you prioritize safety, fixed returns, and tax benefits, PPF might be the better choice for you. However, If you are willing to take on some risk for potentially higher returns and value portfolio diversification, exploring the different types of Mutual Funds could be beneficial.

 

Ultimately, the choice depends on your individual investment goals, risk tolerance, and financial situation. Consider these factors carefully to make an informed decision that aligns with your objectives. Happy Investing!

What is Systematic Withdrawal Plan (SWP)? How It Works.

Are you looking for a reliable source of monthly income from your investments? If yes, then consider the Systematic Withdrawal Plan (SWP). This investment strategy is designed to provide a steady cash flow, ensuring you have regular funds credited to your bank account. Here’s a closer look at how SWP works and why it could be a great fit for your financial needs.

What is SWP in Mutual Fund?

SWP stands for Systematic Withdrawal Plan. The SWP meaning in mutual funds is an extended facility that enables you to withdraw money from your mutual funds in a systematic manner. In an SWP, you can choose your withdrawal amount, frequency, and duration according to your needs. The systematic withdrawal plan (SWP) provides a steady income stream. The main advantage of the best SWP plans in India is it is especially useful for people who want to get a steady stream of income such as retirees. 

 

Here are some important features of a Systematic Withdrawal Plan:

 

  1. Provides a regular stream of income.
  2. Systematically cash in your investment units at regular intervals.
  3. You can choose the amount, frequency, and start and end dates of the SWP plan.
  4. You can either withdraw a fixed amount or only the capital appreciation.

How Does a Systematic Withdrawal Plan Work?

Here’s a step-by-step explanation of how a SWP works:

 

1. Investment in Mutual Funds: First, you need to invest a lump sum in a mutual fund scheme. This can be done through various mutual fund companies offering a range of schemes based on your risk appetite and financial goals.

 

2. Choosing Withdrawal Amount and Frequency: Once your investment is in place, you decide the amount you want to withdraw and how often. For example, you might choose to withdraw Rs.5000 every month.

 

3. Automatic Withdrawals: Based on your instructions, the mutual fund company will automatically redeem the specified amount from your investment at the chosen frequency. These redemptions continue until your investment is exhausted or you decide to stop the SWP.

 

4. Receiving Funds: The withdrawn amount is credited to your bank account on the specified date, providing you with a regular income stream.

 Benefits of SWP

 

1. Regular Income: Ensures a steady stream of income, perfect for retirees or those looking for a predictable cash flow.

 

2. Flexibility: Adjust the withdrawal amount based on your changing financial needs. 

 

3. Tax Efficiency: Enjoy the tax benefits that come with this plan, enhancing your overall returns. 

 

4. Customizable: Tailor the plan to suit your financial goals and time horizon. 

 

5. Rupee Cost Averaging: Since SWPs involve regular withdrawals, they help mitigate the risk of market volatility by averaging out the impact over time.

 

Things to Consider

1. Fund Performance: The success of your SWP largely depends on the performance of the mutual fund you have invested in. It’s important to choose funds with a good track record.

 

2. Withdrawal Rate: Ensure that the withdrawal rate is sustainable. Withdrawing too much too quickly can exhaust your investment prematurely.

 

3. Market Conditions: During market downturns, the value of your investment can decline, potentially affecting the sustainability of your SWP.

Conclusion

A Systematic Withdrawal Plan (SWP) can be a powerful tool for managing your finances, providing a steady income stream while maintaining the growth potential of your investments. By understanding how SWPs work and considering the factors involved, you can make informed decisions that align with your financial goals. Whether you’re planning for retirement or seeking regular income, a SWP might be the right solution for you.

What is NFO(New Fund Offer)? Should you invest or not?

NFO stands for New Fund Offer and is a term commonly used in the world of mutual funds and investments. It offers investors a unique opportunity to invest in a newly introduced fund. In this article, we will explain the meaning of NFO, its types, benefits, and how it works.

Understanding NFO (New Fund Offer)

A New Fund Offer (NFO) signifies the launch of a new mutual fund scheme. During an NFO, the fund company invites investors to buy units of the new scheme. This marks the beginning phase when the fund is open for investment. Usually, there is a fixed subscription period after which the NFO closes, and regular trading commences.

Types of NFO

New Fund Offers (NFOs) can be classified into three main types based on the structure and features of the mutual fund schemes:

1. Open-Ended Funds: Open-ended funds are mutual fund schemes in which you can invest or redeem at any time. This type of fund provides high liquidity as you can enter or exit the scheme anytime. Even after the NFO period is over, you can purchase units of open-ended funds at the prevailing market Net Asset Value (NAV) on any business day.

 

2. Closed-Ended Funds: You can only invest during the NFO period. These schemes are issued for a fixed tenure. Once the NFO period is over, further investments in the fund are not allowed. Redemption happens after the funds get listed on the stock exchange. As per SEBI rules, all closed-end funds must be listed on the exchange.

 

3. Interval Funds: Interval funds combine the characteristics of both open-ended and closed-ended funds. They fall under the category of closed-ended funds, but they allow you to make purchases and redemptions through the AMC window at regular intervals. These intervals may occur annually or semi-annually, allowing investors to transact within specific timeframes.

How does NFO work?

During a New Fund Offer (NFO), an Asset Management Company (AMC) launches a new mutual fund scheme. Investors have the opportunity to subscribe to units at an initial offer price, usually around Rs 10 per unit, during the NFO period. Once the NFO period ends, the fund is officially launched, and investors can buy or sell units at the Net Asset Value (NAV) on stock exchanges.


Professional fund managers use the capital raised during the NFO to invest in various assets based on the fund’s objectives. NFOs offer investors a chance to get into a new fund early with a low initial investment. However, it’s important for investors to conduct thorough research to assess suitability and risks.

Benefits of NFO

1. Fresh Investment Opportunity: NFOs introduce a new mutual fund scheme, allowing investors to get in at the fund’s inception. This can be appealing to those who want to start with a clean slate and be part of the fund’s journey from the beginning.

 

2. Diversification: NFOs can offer additional diversification opportunities. Investors can spread their risk across different funds, themes, or sectors introduced by the NFO.

 

3. Unique Investment Themes: Some NFOs bring innovative or specialized investment themes or strategies to the market, providing investors with the chance to diversify their portfolios distinctly.

 

4. Opportunity to Capitalize on Future Performance: If the NFO is managed effectively and its investment strategy aligns with your financial goals, you may benefit from the fund’s performance as it grows over time.

 

5. Professional Management: NFOs are managed by experienced fund managers who make investment decisions based on the fund’s objectives and market conditions, potentially enhancing the chances of achieving your investment goals.

Drawbacks of Investing in NFO

Investing in an NFO has several potential drawbacks that investors should consider:

 

1. Lack of Track Record: NFOs lack a historical performance record, making it difficult to gauge how the fund will perform in different market conditions. Investors are essentially investing in a concept and the expertise of the fund manager.

 

2. Initial Expenses: NFOs may have higher initial costs, including marketing and distribution expenses, which can impact the returns, especially in the early stages.

 

3. Market Timing Risk: Investing during an NFO period can expose investors to market timing risk. If the market conditions are not favorable after the NFO period, the value of the investment might drop.

 

4. Higher Risk: New funds can be riskier as they have not yet established their performance stability. The fund manager’s strategy might not perform as expected, leading to potential losses.

 

5. Potential for Lower Liquidity: Initially, NFOs might have lower liquidity compared to established funds. This can make it difficult to buy or sell units without impacting the price.

Conclusion

By understanding New Fund Offers, investors can make informed decisions about whether to participate in these initial offerings, considering both the potential opportunities and risks involved. Unlike stocks, investing early in a mutual fund scheme does not provide significant advantages. Therefore, it is more prudent to choose an established mutual fund with a proven track record rather than opting for a new or unpredictable one.

How to optimize a mutual fund portfolio?

In the world of mutual fund investments, more isn’t always better. Are you one of those investors who believe having multiple funds in your portfolio is the key to diversification and higher returns? Think again.

It’s a common misconception that a diversified portfolio means owning numerous funds. However, many investors fail to realize that owning too many funds can lead to unnecessary complexity, overlapping holdings, and underperformance.

 

Let’s break it down:

Understanding Over-Diversification

Imagine you’ve picked 30, 40, or even 50 stocks from a pool of 500-600 options across the entire universe. You’ve spread these stocks across 10-15 mutual fund schemes to diversify your portfolio. However, you’ll find that you have unintentionally invested in all the stocks.

The Problem with Over-Diversification

1. Underperformance: Over-diversifying your investments can lead to underperformance. If you spread your investments too little, you may miss out on the opportunity to take advantage of high-potential stocks or market trends. Instead of outperforming the market, you might end up simply matching its returns or even falling behind.

 

2. Increased Complexity: Managing many schemes can be time-consuming and complex. It requires constant monitoring, tracking performance, and potentially frequent rebalancing. This complexity can detract from your overall investment strategy and may result in missed opportunities.

 

3. Higher Risk: Ironically, over-diversification can increase your portfolio’s risk. Investing in numerous schemes may increase your exposure to certain stocks or sectors. It can leave your portfolio vulnerable to market fluctuations and volatility.

Share the Knowledge

If you’ve found this information helpful, don’t forget to share it with friends who may also have an overly complex mutual fund portfolio. Simplifying their investments could lead to better returns and financial peace of mind.

Conclusion

In conclusion, while diversification is essential, excessive diversification can negatively impact your portfolio’s performance. By simplifying your mutual fund portfolio and focusing on quality investments, you can potentially achieve better results in the long run.

Direct Stocks Vs Mutual Funds: Which Offers Better Profits?

Introduction:

When it comes to investing, the choices can be overwhelming. Stocks promise excitement and the potential for big gains, while mutual funds offer stability and professional management. But which option leads to better profits? Let’s break it down in simple terms.

The Excitement of Stock Investing:

Investing directly in stocks can be an exciting adventure. Many people jump in based on tips from friends or the latest news buzz. However, the reality is that picking winning stocks isn’t easy, and many investors end up with underperforming ones. Plus, it’s hard to gauge true profits when gains might be offset by losses elsewhere.

The Stability of Mutual Funds:


Investing in mutual funds provides stability in a volatile market. Experienced fund managers guide portfolios towards growth while reducing risk through diversification. This oversight relieves investors from choosing individual stocks and offers a clear view of actual profits. Mutual funds suit different investors, with options tailored to various risk appetites and investment goals.

 

Making Your Choice:

While investing in stocks can be tempting, it’s important to consider the risks. Some investors have succeeded with individual stocks, but it requires careful research. On the other hand, mutual funds provide a more reliable approach, offering consistent long-term returns and helping investors reach their financial goals without the ups and downs of stock market speculation.

Conclusion:

In the end, whether you’re attracted to the excitement of stocks or the stability of mutual funds, remember to invest wisely and stay informed. Prioritize your financial well-being by aligning your investment choices with your individual needs and goals. By making informed decisions and staying focused on the big picture, you can build a solid foundation for long-term financial success.

Are you ready to jump on the infrastructure fund wave?

 

India’s infrastructure scene is booming, with a record-breaking budget of over ₹11 lakh crore set aside for growth in FY25. This has naturally caught the attention of investors looking to cash in on this exciting sector. Infrastructure mutual funds could be a great way to ride this wave, but let’s take a closer look before you dive in.

Where do infrastructure funds invest?

We’re talking about more than just roads and bridges! Infrastructure funds spread their investments across diverse sectors like transportation, energy, water and sanitation, communications, and social and commercial infrastructure. It’s a broad play that captures a lot.

How many infrastructure funds are there?

Currently, there are 16 sectoral and thematic infrastructure funds in the game. Two are passively managed and track the Nifty Infrastructure Total Returns Index (TRI). The rest are actively managed and benchmarked against the Nifty Infrastructure TRI and the BSE India Infrastructure TRI.

What are the risks involved?

  1. The Theme may be loosely defined: Fund managers might invest in sectors only loosely related to infrastructure (think automobiles, financials, capital goods). This means some funds might hold less than 10% in pure infrastructure companies, making them misleading.

  2. High capital intensityInfrastructure-heavy sectors require significant capital investments and often operate on thin profit margins with high levels of debt, which can make them vulnerable to defaults.

Past Performance:

 

What You Need to Know

The past performance of infrastructure funds doesn’t always paint a clear picture. Why? Because these funds don’t stick exclusively to companies deeply rooted in the infrastructure theme. Four out of the top five funds (in terms of assets under management) had significant investments in sectors that are not strictly part of the broad infrastructure space over the last five years.

When you compare their performance with the S&P BSE 500 Total Returns Index (TRI), you’ll see that these funds have mostly underperformed over the last 10 years. The performance gap was even wider in the previous decade (2004-2014)

 

What’s the takeaway?

Some infrastructure funds may not give you the returns you expect, especially if they’re straying from core infrastructure investments. Make sure to look closely at the fund’s allocation and past performance before making any decisions.

 

What should you do?

  1. Know your risk appetite: Infrastructure sectors can be cyclical and volatile. Make sure your investment aligns with your goals and comfort level.

  2. Watch out for high debt: Ancillary sectors like aviation, real estate, and power often carry heavy debt and financial stress.

  3. Be wary of diversification: Fund managers might include loosely related companies to balance out the portfolio, which can dilute the fund’s thematic focus.

  4. High concentration warning: Sectoral and thematic funds come with higher risk due to focus on a single sector. Proceed with caution.

While the idea of investing in infrastructure can be appealing, it is important to assess the risks and challenges. Ensure that the fund aligns with your investment strategy and risk tolerance. By investing wisely, your returns will thank you!

Active Funds Vs Passive Funds: Which Investment Strategy is for You?

When it comes to investing, the debate between active and passive funds is a hot topic. Let’s break down the differences between these two investment strategies and help you decide which one aligns with your financial goals.

Understanding Passive Funds

 

What Are Passive Funds?

 

Passive funds track a specific market index, such as the Nifty. The fund manager follows the index’s performance with minimal intervention. This approach is cost-effective and provides consistent returns mirroring the index.

Benefits of Passive Funds

 
  1. Low Fees: Minimal management fees mean more of your money stays invested.
  2. Predictable Returns: Your returns closely match the performance of the index.
  3. Diversification: Investing in a broad market index spreads your risk.

Exploring Active Funds

 

What Are Active Funds?

 

Active funds involve a skilled fund manager who uses research and expertise to outperform the market index. These funds aim for higher returns by selecting investments that they believe will outperform the market.

Benefits of Active Funds

 
  1. Potential for Higher Returns: A skilled manager can generate returns above the benchmark index.
  2. Flexible Strategy: Fund managers can adapt their strategy based on market conditions.
  3. Specialized Focus: Active funds often focus on specific sectors or themes.

Active vs Passive funds: What to choose?

 

The decision between active and passive funds depends on your investment goals, risk tolerance, Financial Knowledge, how much time you can dedicate to managing your investments, and your Investing behavior. Here are some considerations:

 

  • For Active Investors: If you’re comfortable with taking on higher risk for the potential of greater returns and you value the expertise of a professional fund manager, active funds may be the right choice for you.

  • For Passive Investors: If you prefer a low-cost, low-maintenance option that tracks the market, passive funds offer simplicity and consistency.

  • A Balanced Approach: Combining both active and passive funds can provide diversification and help you manage risk while still benefiting from potential opportunities.

Conclusion

Ultimately, The choices between active and passive funds hinge on your financial situation, goals, and investment philosophy. Both types of funds have their own merits, and the best choice depends on your Personal Financial goals, risk tolerance, and investment timeline.

 

  1. Active investing offers the potential for higher returns and dynamic adjustments to changing market conditions. Skilled fund managers actively seek out investment opportunities, but this approach may come with higher costs and risks.
  2. Passive investing provides a low-cost, low-risk strategy that mirrors market performance. This approach is well-suited for investors seeking steady, consistent returns without any need for constant oversight.

The objective is not to save on management fees but to earn more rewards. So, In Passive Funds, the management fee is less, but the rewards are restricted to a benchmark, and In Active Funds, even after paying a higher management fee, the rewards are higher than the benchmark. 

 

To make the most of your investment journey, you can consider a mix of both active and passive funds in your portfolio, which will help you balance the risk and potential returns. It is essential to conduct thorough research and seek advice from a Financial advisor to determine the most suitable approach for your specific financial situation.

Happy Investing !!

Are you missing SIP Installment?

Missed an SIP Installment ? Here's What You Need to Know !

  • Did you just miss a SIP installment and wonder what that means for your investments? Don’t stress! Let’s walk through the details so you can stay on top of your investment game.

Good News: No Penalty from Mutual Funds

First things: Your mutual fund company won’t charge you for missing a SIP installment. You have the freedom to choose how and when you invest your money. Take a deep breath and relax!

Watch Out for Bank Penalties

It’s important to note that some banks may charge a fee for SIP rejection, which can range from Rs.250 to Rs.750 per rejection. While the mutual fund company may let you off the hook, it’s still best to stay on top of your payments to avoid any additional charges.

Don’t worry, we can walk through the details together so you can stay on top of your investment game.

Consecutive Rejections Can Halt Your SIP

Be careful! If your SIP gets rejected three times in a row, the mutual fund company might stop your SIP automatically. That could throw off your investment plans, so be mindful of consecutive rejections.

Here is the Solution

1. Reschedule your SIP Date.

  1. Make your SIP payment within the first 2-3 days after your salary date. This way, your bank accounts will be funded on the ECS date and you will prioritize your investments over spending.
  2. You can also choose a common date for all your SIPs. This will help you to remember your ECS dates resulting in fewer rejections.

 

2. Consolidate your SIP.

Instead of several SIPs of small amounts. Go for 2-3 SIPs of bigger amounts. This will be easier to remember and by any chance, if your accounts are dry you will have only 2-3 rejections.

 

3. Review your SIP amount.

Don’t have a big Investment obligation every month which does not suit your pocket. if you find it challenging to honor all your SIPs review the amount and lower your monthly rejection.

4. Pause Your SIP When Needed

Here’s a smart tip: If you see financial trouble ahead and don’t think you can invest in your SIPs for the next 2-3 months, Pause it instead of missing installments. This way, you avoid bank penalties and keep your investment journey smooth.

Share this information !

  • If you know someone whose SIP is being rejected regularly, be sure to share this information with them.  By knowing their options and understanding the consequences of missing payments, they can make informed decisions about their investments.
  • Stay on top of your SIP installments, and remember that pausing your SIP is a smart alternative if you foresee any financial challenges. 

Happy Investing !!

What happens to my ‘regular’ plan units when switching to a ‘direct’ plan?

 

What will happen to my units with the ‘regular’ plan after I switch to the ‘direct’ plan? Will all units be converted to the direct plan as per the NAV on the switch date or as per the previous SIP dates? – Gajanan G. Khandkar

 

Switching from a ‘regular’ plan to a ‘direct’ plan in mutual funds is similar to moving your investment from one fund to another. While the money doesn’t move through your bank account, it is treated as selling your units in the regular plan and buying new ones in the direct plan. This means you will have to pay capital gains tax and perhaps an exit load.

 

But do remember that when switching funds, while the investment value stays the same, the number of units might change due to the different NAVs of the ‘regular’ and ‘direct’ plans. Let’s simplify this by giving you an example: Say the NAV of the ‘regular’ plan is Rs 10, and you hold 10,000 units. Your total investment in the ‘regular’ plan would be Rs 1 lakh (10,000 x Rs 10).

 

Now, let’s assume that on the date of switching, the NAV of the ‘direct’ plan is Rs 11. In this case, while the investment amount of Rs 1 lakh remains the same, the number of units allotted to you will be slightly different. It will be 8,333.33 units (Rs 1 lakh divided by Rs 11).

 

Source- Valueresearchonline