With existing funds, you get to know how the fund has performed in a lean and a great market, says Dhirendra Kumar
21-Nov-2017 •Research Desk
Why do analysts advice to choose existing funds over new ones?
This is like choosing between something you know about and something you don't know about. I would rather go with something which is tested. Existing funds have an established portfolio and you know where the money is invested. Also, you get to know how the fund has done in a lean market and a great market to understand its behaviour. On the other hand, a new fund will start from scratch, deploy the money and then start generating returns.
Many people have this misunderstanding that you are buying a fund cheap when you are buying a fund early, but it doesn't matter. The same money would go and get invested at today's price. This was a big myth which prevails and for a long period people thought buying a fund unit at Rs 10 is cheap, which is not true.