A New Fund Offer (NFO) is the first-time subscription window through which a mutual fund house launches a new scheme, similar to an Initial Public Offering (IPO) for stocks.
While NFOs often attract investors because of their ₹10 launch price, experts say the offer price alone should never influence an investment decision.
When a similar fund with a proven track record already exists in the market, investors should ask whether the NFO offers any real advantage. Here’s what experts have to say about whether investing in such an NFO is worth it.
Why should you avoid investing in an NFO?
Nilesh D. Naik, Head of Mutual Funds at PhonePe, says investors should generally avoid NFOs that belong to an existing mutual fund category but do not offer anything meaningfully different. In such cases, an established fund with a long and consistent performance history is usually the better choice.
Arjun Guha Thakurta, Executive Director at Anand Rathi Wealth, echoed this view. He advises investors to first assess whether the NFO fills a gap in their portfolio or follows a unique investment strategy.
“If a similar fund already exists, an established scheme offers greater comfort because investors can evaluate its performance across market cycles, alpha generation, portfolio construction, risk-adjusted returns and the fund manager’s execution,” he said.
Thakurta also stressed that investors should ignore the ₹10 launch NAV, as it has no bearing on a fund’s future return potential.
Do NFOs ever outperform older funds?
Experts acknowledge that some NFOs have outperformed older funds, but such cases are exceptions rather than the norm.
Thakurta cited examples such as Motilal Oswal Active Momentum Fund, PGIM India Healthcare Fund and Kotak MNC Fund NFOs. Launched between 2024 and 2025, these funds have outperformed their category averages by around 10-12% over the past year and ranked among the top three performers in their respective categories.
However, he cautioned that such outperformance is largely driven by market timing, portfolio positioning and investment strategy rather than the fact that the scheme is an NFO.
He added that older funds often manage much larger assets, requiring them to maintain liquidity and stability by investing more in high-quality large-cap stocks. As a result, investors should avoid judging a fund based solely on its initial returns and instead focus on whether its investment process is sustainable over the long term.
Why does a differentiated strategy matter?
Experts believe investors should consider an NFO only if it adds something new to their portfolio.
“If an investor already owns large-cap, mid-cap, small-cap and flexi-cap funds, adding another diversified equity fund may offer little additional diversification. Instead, a value fund or a focused fund can provide exposure to a different investment style, provided it aligns with the investor’s goals and risk appetite,” Thakurta explained.
Naik cautioned that a differentiated strategy alone is not enough.
“Just because a fund has a differentiated strategy, doesn’t mean it automatically qualifies for investing. It is more important that the investor understands the role the fund plays in their portfolio,” he added.
He pointed to Defence and Global AI-themed funds, which rewarded investors who understood these niche themes and invested early. However, many investors chase themes after they have already performed well, only to be disappointed when returns moderate.
Naik also noted that in certain categories, such as small-cap, the new funds may have the benefit of higher agility compared to existing funds with large fund sizes.
How long should investors wait before considering a new fund?
Naik believes waiting about three years after an NFO’s launch gives investors enough time to assess the fund manager’s execution, portfolio quality and consistency across different market conditions.
Thakurta concluded that in most cases, investors are better off choosing an established fund with a proven track record rather than investing in a new scheme simply because it is newly launched.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
About the Author
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance.
She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram.
Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
