MAKING SENSE OF THE CHANGE IN NAV APPLICABILITY RULES AND ITS IMPACT


Change is the spice of life and for mutual fund investors it got a little more spicier as SEBI brings about yet another change!

Post Feb 1, 2021, most investors realized that their Investment amounts were not getting the NAV (net asset value) of the same day as was the practice before that.  Before this,  the Investments in mutual funds, if carried out before 3 pm, were bought at the same day's NAV.  It was a simple system to track as most investors would see their investment begin the day funds got debited from their account.  However this has now changed and the NAV would now be given on the day the funds get realized by the fund house. 

This impacts not only the purchase transactions but also the switches from one fund to another in the same fund house.  So the big question is what should an investor do to ensure they get the same day NAV.  First and foremost recognise that this is a regulation that has come to stay and secondly if you really want to go around this, opt in for faster payment modes like  RTGS/NSFT, UPI Payments or Online through a selected list of banks like HDFC, ICICI, SBI, Axis, IDBI, Kotak, Yes, IDFC FIRST, IndusInd Bank which allow instant credit.

The above are great for lump sum purchases but what happens if one is going the SIP(systematic investment plan) or the STP(systematic transfer plans) way.  Well, in case of SIP, investors will get the NAV of the day the funds are received by the fund house irrespective of the date the funds are debited from their banks. The process could take anywhere between 1-3 days depending on the bank mandate and the banking settlement systems that the bank follows.

Similarly, in case of STP, investors would get the NAV of the date on which the funds are realized by the target fund. 

Many investors get concerned when they do not see their transactions reflecting in their target schemes or see the NAV of a later date later.  It would help to remember that the unit allotment would only reflect in their account statements after the funds have been realized by the fund house.  

Wealth is not created by 'timing the market' but rather by being patient, disciplined and most importantly giving 'time to the market.' A long term investor is not going to get impacted by a slight shift of dates by 2-3 days. There is a difference between trading and investing and it would do good the investor to remember the golden rules of investing which is prudent selection of funds and regular monitoring that help an investor meet his financial goals. These are important mantras for wealth creation.

However if one is very particular, then they can always opt for any of the faster payment modes as listed above.


Cheers to an informed investor!

Anupama Bhargava CFP




 

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