The Bangladesh Securities and Exchange Commission (BSEC) has advised investors to check the latest disclosed Net Asset Value (NAV) per unit of a mutual fund before making investment decisions in its units
The regulator issued the advice in a press release on Monday signed by its spokesperson and Executive Director Md Abul Kalam.
The BSEC said a mutual fund pools money from multiple investors and invests it across different financial instruments and assets. The total market value of those holdings, after deducting liabilities, determines the fund’s net asset value.
Dividing the total NAV by the number of units gives the NAV per unit.
For example, if a fund’s NAV per unit is Tk10, the intrinsic asset value of each unit is Tk10.
The BSEC said mutual fund units can sometimes trade in the capital market at prices much higher than their NAV, creating a wide gap between market price and underlying asset value.
It urged investors to exercise caution in such situations.
The commission said NAV is an important measure when evaluating mutual fund units because, in the event of liquidation, a unit holder cannot expect to receive more than the fund’s net asset value simply because its market price had been higher.
For instance, if a mutual fund unit trades at Tk20 while its NAV per unit is Tk10, an investor is effectively paying Tk20 for assets worth Tk10.
The BSEC therefore advised investors not to buy mutual fund units merely because their market prices are rising, but to understand the reasons behind any gap between market price and NAV.
It urged investors to check the latest published NAV per unit before making an investment.
The regulator also advised them to consider the fund’s financial condition, tenure, portfolio, investment strategy and other published disclosures.
The BSEC stressed that investment decisions should not be based solely on rising market prices.
It also warned investors against acting on rumours, information circulated on social media or persuasion by any individual or group.
