This is a perfect section for you if you are interested in enhancing your knowledge about Financial Matters. A few tips and tricks about Investing, Shares, Mutual Funds and Money Saving Schemes.
Following is a pictorial description of how the Guaranteed NAV plan works with assumption of a 7 year tenure.
How do Highest NAV Guarantee Plans work?

How Investors get Confused

You have to read in between the lines; Investors need to understand that these schemes guarantee the “Highest NAV”, READ AGAIN!, it’s Highest NAV and not “Highest Returns”. Normal Investors don’t give much thought before buying these products and normally assume that the returns will be linked to the Equity Markets .


Returns from Highest NAV Guarantee Plans

So, what are the return expectations of these funds? We know, that long-term equity returns, are normally in the 12-15% range while, debt returns turn out to be 6-7%. So, considering the fact, that these products will shift most of their money to debt, by the end of the tenure, we can expect the returns to be in range of 9-10%. We do get some equity upside in these products, but that will be limited. After a point, this product will turn into a debt oriented fund with a major portion in debt. Also if you factor in costs, like premium allocation charges, fund management charges and other yearly charges, the returns will not be what you actually expect.
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