NFO stands for New Fund Offer. It is basically a new scheme launched by an AMC. As the bull run of market continues, there are more and more NFOs getting launched by Mutual Funds.
But is it something you should consider for investing or this needs to be avoided? To answer this question, let’s understand few points:
- Since it’s a new fund offer, we do not have track record of performance.
- New fund scheme offered by an AMC does not necessarily mean that it is better than same category old schemes offered by other AMCs.
- It is important to have track record of the fund manager as we do not have track record of the new fund.
Considering the points mentioned above, NFO needs to be considered for investment only if track record of the fund manager is exceptional. Let’s understand this point with an example, suppose there is a fund manager belonging to an AMC managing it’s midcap fund for the last 5 to 10 years and has given exceptional performance beating the category average and benchmark by large margin. The same AMC launches an NFO in small cap category with the same fund manager, you can consider this NFO for investment. In any other case, it’s better to avoid NFO and opt for old funds having track record of performance.