You may not get MF units at your investment day’s NAV

Yes you read it right. And this has been happening since start of February 2021 and has led to dissatisfaction among MF investors for not knowing exactly which day’s NAV they would be getting.

For investments in mutual fund scheme’s to be allotted a day’s NAV, two factors come into play:

This rule of money reaching the fund house was earlier applicable only for investments about Rs 2 lakh. So earlier for investments below Rs 2 lakh, investors could get the MF units and the NAV of the investment date even if the money reached the mutual fund a couple of days later! However, this exemption was ended by SEBI from 1st February 2021. Now, irrespective of the investment amount, the money must reach AMC account to be eligible for getting a day’s NAV.

In last few days (in February 2021), several thousand investors had complained about the delay in allotment of units (due to uncertainty about when funds actually reach AMC accounts) even after debiting the bank accounts of the investors. As a result, the NAV for the units purchased was not allotted on the same day on which investments were made. For many, this led to allotment of units 3 to 5 days later than what was anticipated.

As far as I know, there was a temporary technical issue behind this delay in NAV allocation. But I am not sure if this problem has now been solved for good and will not reoccur in future. I think for a reliable remedy to this problem, some intervention may be required from RBI, SEBI and other concerned authorities.

For the investment process to work smoothly, there are several entities that process various parts of the transaction. Now as the units are allotted based on fund realization at AMC level, delays (in giving NAV) are bound to happen if any one of the components in this chain of dependency fails to deliver on time.

Does this have a big impact on MF investors? Depends on whether its lumpsum vs SIP investments.

For lumpsum investments in mutual funds, this can be a bit problematic. Imagine market falls by 5% on a day and you want to invest a lumpsum to benefit from low prices. You invest before the required cut-off time. But since money only reached the AMC after 2-3 days, you only get the NAV of the 3rd day from the date of investment. And if by then the market has moved back up by 4-5% then, you will be unable to benefit from your intent of buying low when market fell by 5%. On the other hand if it’s a sort of rising market, then I guess the late allotment of MF units could mean that you miss out on a bit of the up move.

For SIP investors, and assuming they are investing for the long term, I think a delay of a few days here and there in NAV allotment may not make much of a difference. The SIP investors are better off worrying more about making sure that they invest every month instead of worrying about the actual timing of their MF buy transactions.

Though I am sure the glitches will be ironed out soon, I think its best to have a sort of thumb rule at hand that when you make a purchase transaction of mutual funds, then you will get NAV within 1-4 days of the actual order date.

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