The last three years have seen a launch of more than 300 new equity and hybrid funds. The momentum continues unabated in 2024, with 16 new fund offerings in January alone.
Since there’s a surge in new fund launches, investors face a crucial question: How should one approach NFOs, and more importantly, are they investable?
Let’s look at them one by one.
If the new fund doesn’t add anything to your portfolio, ignore it. For instance, if you already have a small-cap fund, ignore the launch of a new fund.
Something new does not necessarily mean something useful. If you have already built a portfolio that sufficiently covers your investment needs, the new fund is avoidable.
There are three aspects to this question. We’ll walk you through each.
Are there funds with a similar investment strategy? If there are, opt for the proven funds.
Does the new fund follow an investment strategy that has a history of poor performance? If so, there’s no point in self-sabotaging your investment portfolio.
Has the new fund introduced a unique feature or brand-new investment style? In this case, too, we suggest you monitor them for at least three years before adding them.
The idea of investing in a new fund is a resounding ‘No’ 99 per cent of the time. Don’t let FOMO drive you to make hasty investment decisions.
Wait for the fund to mature for at least 3 years to assess performance. NFOs often encourage lumpsum investments in equity. Avoid that. Start an SIP, instead.