Number Of Mutual Fund Units & Its Significance:

Recently one of well known finance professional Manoj Nagpal conducted online poll about significance of number of units.The poll was like this:

In fact there are 2 ways to look at the aspect about number of mutual fund units.

Aspect 1:

Consider SIP in two different funds having different NAVs

• Consider Fund 1 with NAV : 10.
• Consider Fund 2 with NAV: 400.

 

1. Here Fund 1 can get more number of units than Fund 2.
2. But as Fund 2 can outperform fund 1, ultimate valuation will be higher for Fund 2 despite having lower number of units.
3. so for this aspect number of units  will irrelevant and ultimately fund performance will be important.

Aspect 2:

Investment in single  fund suppose Franklin Prima Fund:

then just for example, for 04 last installments number of units accumulated will be like this:

1. See the units indicated in Green colour.
2. Due to NAV dip investor have received some what more units which becomes relevant when NAV is now 677.
3. So Number of units accumulated are relevant here for Aspect 2.

Summarizing:

1. Number of units are irrelevant when we compare two funds having two different NAVs.
2. Number of units are relevant when talk about investment in same fund..Units bought at higher level or lower level can affect the number of units and in turn fund value.