Well the only positive thing about an NFO is large number of units available.If we analyse the example given if the fund does well in the long run then we can continue to redeem units in chunks and will earn more money.Definitely redeeming 1000 units will earn more profit than redeeming 250 units as the issue price is Rs.10 in an NFO and not the existing NAV.
But then careful analysis has to be done before investing in an NFO.
Hi i am new to mutual Funds. I agree with you what you are saying that both of them(in ur example) will have same value after there is a Increase in 10% on NAV.But can you tell me this situation while investing we will go either for a Divident or a growth so in that case one who invested in new fund will get more returns than the other as that depends on the No of units one Holding.So can you please clear me on this.
Small calculation as per my knowledge please correct me if i am wrong. suppor Old fund declares a divident of 50% . A will get returns of 1250/-(250*5). and second Fund Declares return of only some 15% u say as it is new one (can be less thanthis also) 2nd one who invested in NFO will get a returns of 1500(1000*1.5).
Hi, practically i have got returns of 30%[averaged] on buying funds in NFO. I have always bought funds in NFO and not one is doing bad. Some do as well as 80% returns. The most important thing which i find is getting more units at lesser price. More the units, more returns in long returns. The rate at which money grows in NFO is more than on buying a fund which is already stable. I know, a very very small risk though.
NFO have to prove in the market. If it gone for a toss, many will lose the money. Its better to invest in already proven funds for years than in NFO. I dont know the risk factor in the both case. but if you really risky, then go for NFO. it may can bring back huge profit
RE:NFO Vs Existing funds
by Prashant Rana on Mar 21, 2006 03:08 PM
My interpretation is that what the author means is that if there is a fund a and nfo fund b, and both appreciate by 10%, there value is the same and a 10 rupee nfo does not mean that you go and but every nfo which comes up in the market. Whether both appreciate by 10% is an assumption.
The main advantage that the old funds score is that you have some view of the past performance. you can also see the portfolio breakup and see whether you see any growth in the portfolio.
Also one can talk about the expenses which the fund house amortises in the first 5 years which effects the NAV.
As said earlier it does not mean that one does not invest in NFOs at all. Its just that you should keep a diversed portfolio and look for longterm growth in current scenarios.
Please note: Past performance may or may not be sustained in future.
RE:NFO Vs Existing funds
by KLN on Mar 21, 2006 02:56 PM
it depends on the fund manager's expertise. one of the nfo that is performing well is principal large cap.
