Skip to main content

Say No to Mutual Fund NFOs

Top SIP Funds Online 


Suddenly, some mutual fund advisors are in love with New Fund Offers or NFOs. A mutual fund house comes up with a New Fund Offer to launch a new scheme. Most mutual fund advisors do not encourage investing in new schemes because they do not have a performance record.


Advisors argue that it is better to invest in a scheme with a consistent performance record in the same category rather than betting on an unknown entity. Advisors make an exception only when an NFO offers something 'unique' that is not available in the market.
  

So, what has changed? Why are some advisors smitten by NFOs these days? Are advisors recommending NFOs because they are offering something 'unique' or they have something that is not available in the market? The answer is no

Some advisors are pushing plain vanilla equity schemes for reasons better known to them. Sometimes, they tell their clients that the scheme would do well because it is from a great mutual fund house. They also recommend some schemes because they are managed by star fund managers. Mostly, they claim (wrongly) that the NFO theme is going to be flavour of the market in the coming days. It really doesn't matter whether the NFO is a largecap offering or a tax savings scheme.
  

My guess is that people are coming with certain theories because the market is at an all-time high, Trendy Investments. Otherwise, there is no reason to recommend new schemes when you already have established schemes available in the same category

There are many financial advisors who frown upon the new-found love for NFOs among their counterparts. They say that some of these advisors were pushing closed-ended NFOs to their clients with the promise of higher returns, whereas the real reason could be extra commissions for them.

How can you push an NFO when there are established players in the same category. We do not recommend IPOs and NFOs

Critics allege that mutual funds are offering extra incentives to their sales force to push their NFOs. However, they are quick to add that they have no proof to back up their claims, except for the fact that NFOs may offer slightly higher commission to distributors. Some others believe that advisors are trying to cash in on the bullish IPO market, where novices throng for listing gains. They say some investors still subscribe to the bogus theory that investing in a scheme
with a Net Asset Value of Rs 10 is better.
  
To sum up, you should avoid NFOs unless they offer something unique. It is always better to invest in a scheme with a proven track record. Sure, the past performance may not be repeated. But the consistent performance of a scheme during different market cycles give you a lot of comfort.   

Here are a few quick pointers that would help you to corner your mutual fund advisors. Whenever your advisor tries to sell you an NFO on the pretext of some new theory, you may try these counterarguments.

Claim: The fund house is great
Counter claim: There are many great fund houses in the market.

Claim: The fund manager is great
Counter claim: There are many great fund managers in the market.

Claim: ELSS scheme is great for tax planning.
Counter claim: I know that, but there are many established ELSSs available in the market.

Claim: Largecap/midcap/smallcap/multicap schemes are going to do well in the coming days.   
Counter claim: Okay, but is it necessary to invest in a new largecap/midcap/smallcap/multicap scheme when there are many established schemes in the respective category available in the market.





SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich
For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300
OR
You can write to us at
Invest [at] SaveTaxGetRich [dot] Com 

Popular posts from this blog

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...
Read more

Total Returns Index brings out real Equity Funds Performers

From February, equity mutual funds have to change their benchmarks to account for dividend payments. Until now, funds used price-based benchmarks alone. TRI or total return indices assume that dividend payouts are reinvested back into the index. What this does is lift the overall index returns, because dividends get compounded. For example, the Sensex TRI index will consider dividend payouts of its constituent companies while the Nifty50 TRI index will consider dividends of its constituents. Using TRI indices as benchmarks comes on the argument that an equity funds earn dividends on the stocks in its portfolio, which they use to buy more stocks. Therefore, using an index that also considers dividend reinvestment would be a more appropriate benchmark. Shrinking outperformance With a stiffer benchmark, it is obvious that the margin by which an equity fund outperforms the benchmark would shrink. Rolling one-year returns from 2013 onwards, the average margin by which largecap funds out...
Read more

Stock Review: Havells

HAVELLS India's stock performance has been muted in the past three months, in line with the weak broader market. But, given the turnaround in its overseas subsidiary and the launch of new products in its consumer durable business, the company's stock may undergo a re-rating.    Havells is India's leading consumer electrical goods company, with consolidated sales of . 5,527 crore in the past four quarters. Its wholly-owned subsidiary Sylvania, which makes lighting and fixtures, has established brands in European, Latin American and Asian markets. Sylvania repre sented nearly half of the company's consolidated revenues in the first half of FY11.    Sylvania's poor financials hit Havells' consolidated performance in FY10. But, this has changed in the cur rent fiscal. Havells has reduced fixed costs of Sylvania by exiting from unprofitable businesses and outsourcing manufacturing to low-cost locations such as India and China. In the September 2010 quarter, Sylv...
Read more

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Health for Wealth - How to buy Health Insurance ?

Tax Saving Mutual Funds Online Current open Infra Bond Application form   HEALTH insurance is a relatively new phenomenon in India. Hence, it is not on the top of the mind for most people to make a conscious commitment towards health insurance. However, it is imperative for each one of us to plan for better health for our families and ourselves. There's no better way than to start with making health your top priority this year. So, your health insurance resolution charter would look something like: ■ Invest in health for wealth: Timely investment in health insurance can help build a security net and hedge sudden dilution of another financial asset class in the event of a health emergency, making it imperative to opt for a comprehensive health insurance plan. ■ Buy a comprehensive health cover that fu lfills your health needs for life: Buy a personal health insurance cover even if you have an employee cover because 'employer provided' health insuranc...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now