Mutual Funds Day 12: Units

The quantity of Mutual Funds allocated to you is called Units. In the last chapter we learned about NAV, we will understand the units allocated based on an example.

Suppose you have a MF SIP of Rs25000 every month.

The NAVs for these 3 months were

1. January — 1141.42
2. February — 1171.64
3. March — 1082.22

We can calculate the units allocated by dividing the fund allocated by the prevailing NAVs, i.e.

1. January = 25000/1141.42 = 21.9025
2. February = 25000/1171.64 = 21.3376
3. March = 25000/1082.22 = 23.1006

If you add up the 3 month’s units you will get the total number of units in your portfolio. At the time of redemption, you need to multiply the units with the NAV to get the final fund value.

An interesting observation is that, when the NAV goes down you get more units allotted for the same capital. It is a concept called Rupee Cost Averaging.

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