Don’t Rush Just Because It’s New

Over 200 schemes have been floated by various mutual funds in the past seven years. Scores of investors prefer New Fund Offer (NFO) over the existing one on the grounds of better value. However, in an investment ecosystem, a Rs 10 face value is not cheaper than the fund trading at the Net Asset Value (NAV) of Rs 20. An NFO cannot be equated with the IPO of the stock where price fluctuations can be as high as 50 - 80 per cent. An NFO stage means that the fund house is simply collecting money that will be deployed at a later stage. This is a disadvantage because the investor cannot evaluate the portfolio quality of the fund. Living under the roof of the misconception that NFO offers a good entry point can make the investors miss the opportunity in existing funds. When it comes to mutual fund investing, the value of NFO could go up by the same percentage as that of an existing fund. Hence,...