However, there's an interesting development happening: Fund houses have found a loophole in the "thematic fund" category. This allows them to launch numerous schemes beyond the 36 prescribed categories, as thematic funds can target various sectors, trends, or investment strategies.
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| Source - Mint |
The rapid growth in mutual fund industry assets, an increasing number of investors, and the entry of new fund houses have resulted in numerous new fund offers, with existing fund houses introducing products in categories where they lack a presence, while new entrants focus on enhancing their offerings in themes they find attractive.
An NFO is essentially the mutual fund equivalent of an IPO in stocks, but with some key differences:- It's the first-time subscription offer for a new mutual fund scheme
- Always priced at ₹10 per unit (unlike IPOs which are often priced at a premium)
- Allows a fund house to enter categories where they don't currently have products
- Guarantees full allocation (unlike IPOs where you might get partial or no allocation if oversubscribed)
- Once the NFO period ends, the scheme reopens for regular subscriptions at the prevailing NAV
- Don't invest just because the NAV is ₹10 - this doesn't make it "cheaper" or more valuable
- Evaluate if the NFO fits your portfolio needs, risk tolerance, and financial goals
- There's no rush - you can wait to see the actual portfolio composition after launch
- Be cautious of "narrow themes" and highly specialized sector funds that may carry higher risk
- Watch out for high-pressure marketing tactics surrounding NFOs
Remember, a solid investment portfolio should be built based on your personal financial goals, time horizon, and risk appetite - not based on what new products are being aggressively marketed.