Many mutual fund investors consider investing in an NFO or New Fund Offer because it is coming from their favourite fund houses or it is managed by their dearest fund managers. Some investors also believe that NFOs are cheaper because they offer the units at Rs 10.
Mutual funds launch or offer new schemes to complete their bouquet of offerings or to offer an interesting theme or idea that may offer an opportunity to create wealth. These New Fund Offers or NFOs are a great draw among mutual fund investors.
However, just because your preferred fund house has launched a scheme doesn’t mean that you should invest in it. Sure, your beloved fund houses may be managing some great schemes. However, there is no guarantee that the new scheme will also be a great hit. The same logic applies to the argument about your dear fund managers.
Some investors also erroneously believe that schemes with NAVs of Rs 10 are better than schemes with higher NAVs. This belief was prevalent earlier. However, as awareness spread, this mistaken notion died its natural death. However, some new investors still fall for the sales pitch. An existing scheme with a long track record will have a higher NAV because it has already made investments and benefited from those investments. A new scheme, on the other hand, is still starting to invest. That’s why the NAV is Rs 10. It will collect money and then start investing.
So, should you invest in an NFO? It is always better to invest in schemes with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings. Most mutual fund experts say you may consider investing in a new scheme if it offers something unique or new that is not available in the market.
Here are the New Fund Offers currently open for your perusal.
Source: ACE MF, Data as on February 21 2023
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