Can a value of mutual fund decrease even after a rise in it’s NAV?

Originally asked and answered on Quora, following is the link

Now an investor has invested Rs. 400 in Reliance liquid fund-Treasury plan when the NAV was 4023.9108(units allocated=0.099). The very next day NAV increased to some 4024 and now it is 4026.7599 but the value of his fund reduced to 398.65. So, he was wondering that even though the NAV increased why did he lose value?

This is a very interesting situation and a basic fallacy in how the mutual fund system works in India. Continue reading “Can a value of mutual fund decrease even after a rise in it’s NAV?”