Rs. 100- Rs. 10 crore
Start investing with Rs. 100 | Easy KYC | Expert-managed funds
Mutual Funds vs Other Investments- Which Is Better
In summary
An NFO, or New Fund Offer, is the initial subscription period of a new mutual fund scheme. An existing mutual fund has already started operations and has information that you can analyse before investing.
- An NFO is available for subscription only during its offer period.
- An existing scheme has a performance and portfolio history that you can review.
- An NFO's initial offer price does not mean the scheme is cheaper.
- Every mutual fund scheme must display a SEBI Riskometer.
- An NFO can invest across equity, debt, hybrid, index, or other permitted categories.
- The Bajaj Broking website offers 4,000+ mutual fund schemes.
- SIP and lumpsum investment options are available, subject to scheme terms.
SEBI's current framework requires an NFO to remain open for at least 3 working days and generally no more than 15 days.
What is an NFO?
NFO stands for New Fund Offer. It is the initial subscription period during which investors can invest in a newly launched mutual fund scheme.
The AMC launches the scheme with a defined investment objective, asset allocation, benchmark, risk profile, and other terms described in its Scheme Information Document (SID).
An NFO can be launched for different categories, including equity, debt, hybrid, thematic, or index funds. Because the scheme is new, it does not have its own historical performance record.
If you want to understand the application process in greater detail, the article how to invest in NFO explains how investors can apply through online and offline routes.
What is an existing mutual fund?
A mutual fund pools money from multiple investors and invests it according to the scheme's stated objective.
An existing scheme has already begun investing and generally has a history of NAVs, portfolio disclosures, performance, expenses, and other information that you can examine.
For example, if you are considering an equity mutual fund that has operated for several years, you can review its portfolio, historical performance, risk level, and performance against its benchmark.
This information is not available for a newly launched NFO.
How does an NFO differ from an existing mutual fund?
The main difference concerns the information available for assessment. This comparison explains how NFOs and existing schemes differ across important investment and evaluation factors:
| Feature | NFO | Existing mutual fund |
|---|---|---|
| Availability | Open during a specified offer period | Open throughout the year if it is open-ended |
| Performance history | Not available | May be available for different periods |
| Unit price | Initial offer price, commonly Rs. 10 | Units purchased at the applicable NAV |
| Portfolio history | Not available before investment begins | Current and previous portfolios may be reviewed |
| Evaluation | Based mainly on scheme documents and strategy | Strategy, portfolio, risk, and performance can be reviewed |
| Return certainty | Returns are not guaranteed | Returns are not guaranteed |
An existing fund provides more information for analysis. However, a longer operating history does not automatically make it suitable for every investor.
Does an NFO’s Rs. 10 price make it cheaper?
An NFO may initially offer units at Rs. 10, while an existing mutual fund may have a much higher NAV. This difference does not mean the NFO is cheaper or has greater return potential.
Suppose you invest Rs. 10,000 in an NFO priced at Rs. 10. You receive 1,000 units. If you invest the same amount in an existing scheme with an NAV of Rs. 100, you receive 100 units.
If both investments grow by 10%, their values increase to Rs. 11,000 before considering expenses. The number of units and starting NAV do not determine the percentage return. Portfolio performance, market conditions, expenses, and investment strategy affect the result.
What should you check before investing in an NFO?
An NFO has no historical results to assess. The following factors can help you understand its strategy, costs, risks, and suitability before making an investment decision:
| Factor | What to review | Why it matters |
|---|---|---|
| Investment objective | Intended purpose and strategy | Shows what the scheme aims to achieve |
| Asset allocation | Planned equity, debt, or other exposure | Helps you understand possible risk and volatility |
| Benchmark | Index used to compare performance | Provides a reference for future evaluation |
| Riskometer | Risk level from Low to Very High | Indicates the scheme’s assessed risk |
| Expense ratio | Cost charged for managing the scheme | Expenses reduce the investor’s returns |
| Fund manager | Experience and investment approach | Provides management context without assuring performance |
| Exit load | Charge for specified early redemptions | Can affect the amount received when exiting |
You should also read the Scheme Information Document, Key Information Memorandum, and other scheme-related documents before investing.
What are the advantages and limitations of NFOs?
NFOs can provide access to new investment strategies, but they also involve uncertainty. Consider both their possible advantages and limitations before deciding whether to invest:
| Possible advantages | Important limitations |
|---|---|
| Access to a newly introduced strategy or theme | No historical performance record |
| Opportunity to invest during the launch period | No established portfolio history |
| Availability across different fund categories | Returns cannot be predicted from the offer price |
| Professional management by the AMC | A similar existing fund may already be available |
| Exposure to a new index or market segment | The strategy may remain untested across market cycles |
Newness alone is not an investment advantage. Consider whether the scheme adds useful exposure to your portfolio without creating unnecessary duplication or concentration.
How do you invest in an NFO?
You can apply for an NFO through an eligible investment platform during the offer period. Follow these steps after confirming that the scheme suits your requirements:
- Complete your KYC using the required identity and address documents.
- Log in to your investment account.
- Open the available NFO section and select the relevant scheme.
- Read the Scheme Information Document, investment objective, costs, and riskometer.
- Enter the investment amount and select an available payment method.
- Review the application details before confirming the transaction.
- Track the allotment and subsequent investment details through your account.
Available investment modes can vary between schemes. A lumpsum subscription may be available during the NFO, while an SIP may begin later if the scheme supports it.
Should you choose an NFO or an existing mutual fund?
An existing mutual fund may be easier to assess because you can review its portfolio, NAV history, risk measures, and performance across different periods. This additional information can support a more detailed comparison.
An NFO may be considered when it offers a genuinely different strategy that supports your investment goals. However, the scheme should not be selected only because it is new or its units are offered at Rs. 10.
In both cases, check your investment horizon, financial goals, risk tolerance, costs, and existing portfolio allocation. You should also compare the scheme with alternatives in the same category.
Conclusion
Choosing between an NFO and an existing mutual fund depends on the information you need and how well the scheme suits your goals. An NFO provides access to a newly launched strategy but has no performance or portfolio history. An existing mutual fund offers more data for reviewing returns, holdings, costs, and risk. However, past performance does not guarantee future results. Compare the investment objective, benchmark, asset allocation, expense ratio, exit load, and riskometer before investing. You can explore NFOs and existing schemes on the Bajaj Broking website and invest through available SIP or lumpsum modes after completing your KYC.
Explore Investment Tools
Articles and Insights
Frequently Asked Questions
Understanding NFOs and existing mutual funds
What is the difference between an NFO and a mutual fund?
An NFO is the initial subscription period for a new mutual fund scheme. An existing mutual fund has completed its NFO period and has historical NAV, portfolio and performance information available.
Should I invest in an NFO?
Consider the scheme’s investment objective, asset allocation, riskometer, costs and other scheme details before investing. An NFO should not be selected only because its initial NAV is low.
Can an NFO have a lower NAV than an existing mutual fund but still carry similar risk?
Yes. A lower NAV does not mean an NFO has lower risk or is cheaper. Risk depends on the scheme’s investments, objective, asset allocation and other factors.
How can investors evaluate an NFO without historical performance data?
Investors can evaluate an NFO by reviewing its investment objective, asset allocation, benchmark, fund strategy, risk level, expense ratio, and the experience of the fund manager and AMC. They can also compare the proposed portfolio and strategy with existing funds having similar objectives to understand the potential risks and characteristics.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.