July 4, 2021
“You only have to do a very few things right in your life so long as you don’t do too many things wrong” – Warren Buffett
When markets are trading at all-time highs with most people waiting for correction to happen, investors are baffled by rush of new fund offers (NFOs) by the mutual fund companies. Even when they find some NFO worth considering, they are confused whether they should invest in them at such high levels of market or not.
There are two questions – 1) whether one should invest in an NFO? And 2) Should one invest at the current markets levels? Let’s evaluate the situation and check if this is the right time to take a plunge into NFO or not.
Whether one should invest in an NFO – Traditionally we have been of the view that when there are already established schemes available with the same objectives and had been doing well, we should avoid a new fund whose performance is yet to be seen.
Over a period we have experienced, as the size of AUM grows of the existing scheme, their performance starts feeling the pressure of its size. Because of their large size fund manager is not able to move swiftly to tackle the market situation.
So when a new fund is launched, if it comes from a fund house who are process oriented and you are pretty satisfied with their processes. The fund managers have a good past track record of managing other schemes then it would be worth investing into a new scheme than an existing AUM heavy scheme.
Should one invest at the current markets levels – By no parameter current markets are cheap. They are overpriced and many people are waiting for correction. So should one invest at the current high levels? Advantage that an NFO have over other existing scheme is that fund manager of an NFO will be in no hurry to invest all the subscription he received during the NFO. He can wait for right levels and invest these funds over a period of six months or even more. Should one need to invest funds for long term in the equity, it would be wiser to invest through NFO than in an existing scheme presently.
So for now, we suggest you should consider NFOs for your long term investment. And while choosing an NFO don’t forget to check if it fits into your portfolio and meets your investment criteria other than the performance.
Please do let us know for any query you may have or wish to know which NFO is good for you. You may write to us email@example.com or whatsapp your query to 9958447700 or 9254673750.