NFO Watch: Five new mutual fund offers open this week

economictimes.indiatimes.com:

sectoral funds, a multi cap fund, an index fund, and overnight fund are open for subscription. After a dry spell for a short period, the NFO market is again showing some signs of revival. Should you invest in these NFOs to maximize the returns from your mutual fund portfolio? First, find out why mutual funds launch NFOs. Mutual fund houses typically launch new schemes because they want to complete their bouquet of offerings or to increase their assets under management. Sometimes, funds may have discovered an interesting theme or idea which they think may offer an opportunity to create wealth. An investor need not bother about fund houses completing their offerings or chasing AUMs. If it’s a unique idea, you should take a closer look.

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Many mutual fund investors consider investing in a New Fund Offer or a new scheme if it is from their favourite fund houses. Some investors choose NFO if it is managed by a star fund manager. Some investors consider investing in NFOs as they are cheaper and offer the units at Rs 10. However, just because the NFO is from your preferred fund house 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 star fund managers. They may or may not replicate the success. The myth of Rs 10 NAV is something that refuses to die. A scheme with a lower NAV need not be better than schemes with higher NAVs. This belief was prevalent earlier. However, as awareness spread, this mistaken notion died its natural death. However,