Mutual funds have live NAVs. Is checking them too often hurting investors? Radhika Gupta explains

Investors today have more data available at their fingertips than ever before. Mutual fund NAVs, stock prices and portfolio values can be checked instantly on a smartphone. While this information can help investors make better decisions, looking at investments too frequently could also make it harder to stay focused on the long term, according to Radhika Gupta, MD and CEO, Edelweiss Mutual Fund.

Gupta pointed out that investors are often willing to hold other assets patiently because they do not receive a live valuation every few seconds. Fixed deposits, private businesses, single malts and even ancestral furniture come with a live NAV flashing on our phones every second.

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Radhika Gupta on social media platform X wrote, “Dear Investor, Data helps us make better decisions. But it can also shorten our time horizon. Think about the things we hold patiently: FDs, single malts, private businesses, even ancestral furniture in our homes. None of them come with a live NAV flashing on our phones every second…………………………….. The house wouldn't have changed. Only your experience of owning it would. Love, Zindagi"


Stocks and mutual funds, however, are different. Their prices and NAVs are readily available, which makes it easy for investors to check them repeatedly. Gupta highlighted the irony that the more frequently investors observe their investments, the more volatility they may feel.

The underlying investment may not have changed, but the frequency at which it is being observed has. As a result, short-term market movements can appear more significant simply because investors are constantly monitoring them.

Gupta suggested that investors should instead evaluate an investment over the time horizon for which it was designed. An overnight fund, for instance, can reasonably be evaluated over a short period. An equity mutual fund, however, is generally intended for a much longer investment horizon and may not be meaningful to judge based on its daily movements.

The same idea can be understood through an example involving a house. If a house had a live NAV flashing on the owner's phone throughout the day, the house itself would not become more volatile. The owner would simply become more aware of every movement in its perceived value.

This could lead to repeatedly checking the valuation, comparing it with a neighbour's house and wondering whether the property was bought at the right price. The asset itself would remain unchanged, but the experience of owning it could become more stressful.

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For mutual fund investors, the broader lesson is to avoid allowing the availability of constant data to dictate the investment horizon. While monitoring investments is important, evaluating them over an appropriate time frame can help investors distinguish between short-term market movements and the longer-term objective of the investment.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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