Truth Speaker Mitra (@SubhajitMitra) 205 Followers 10 Oct

Mutual Funds 731 3

Mutual fund NFOs— Why investing in NFOs are not a good idea

Sometimes AMCs introduce new funds because there is a need in the market for a specific type of fund, other times it may be because they wish to round out or expand their product offering. Any reason could be to blame. Therefore, just because a fund is created doesn't guarantee that investing in that fund category is a good idea at that particular time.

Suppose you have to choose NFOs between SBI and a new startup X. SBI is better choice with good track history as the new firm despite having a good quarter can disappoint you in YoY return. However, the new fund can give you a pocket friendly buying option.

For a new fund, the marketing team has a brand building and awareness cost, which is indirectly charged on investors via the cost of app, web platforms.

NFOs are not as same as IPOs — maximum investors think NFOs are as same as IPO, which is not! That's why investors have no option of benefits during demand and supply game of stock market.

It can be important to take them into consideration if you are receiving a discount during the NFO. Close ended NFO funds are also good option.


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