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Why?
Because they already have similar funds among their existing schemes. So, there is nothing really "new" in these New Fund Offers. You can invest in the existing "proven" funds and earn practically speaking the same kind of returns as in these 'new funds'.
Then, why this mad rush on the part of AMCs to launch NFOs every other day?
More importantly, why this mad rush on the part of investors to invest in these NFOs?
The problem is YOU.
YOU are the reason for this needless NFO mania.
You are more than willing to invest in a scheme whose NAV is Rs.10. But, you will NOT invest in a similar scheme with say NAV of Rs.100.
You believe that Rs.10 NAV is "cheaper" — and hence "better" — than Rs.100 NAV.
Sorry to say, but you are COMPLETELY WRONG if you think so.
Yes, the NAV stands for the 'Net Asset Value'.
Yes, the NAV is the price you pay for each unit of a mutual fund scheme.
Yet... when you are buying (or selling) mutual funds, NAV is Irrelevant, Immaterial and Inconsequential.
Want to see HOW?
Investment A
Fund : DSP Nifty 50 Index Fund - Regular Plan - Growth
Amount : Rs.10,000
Date of purchase : Feb 27, 2019
NAV : 10.0071
Units alloted : 999.290 (= 10,000 / 10.0071)
Date of sale : Sept 1, 2021
NAV : 16.0016
Value : Rs.15,990 (= 999.290 * 16.0016)
Profit : Rs.5,990 i.e. 20.54%
Investment B
Fund : HDFC Index Nifty 50 - Regular Plan - Growth
Same Amount : Rs.10,000
Same Date of purchase : Feb 27, 2019
NAV : 97.9633
Units alloted : 102.079 (= 10,000 / 97.9633)
Same Date of sale : Sept 1, 2021
NAV : 157.2039
Value : Rs.16,047 (= 102.079 * 157.2039)
Same Profit : Rs.6,047 i.e.20.71%
Conclusion
NAV of HDFC Index Nifty 50 Fund was almost TEN TIMES more than the DSP Nifty 50 Index Fund.
Yet, both gave practically the same returns.
Not convinced?
Want more proof?
Investment C
Fund : Nippon India Index Fund Nifty Plan - Regular Plan - Growth
Amount : Rs.10,000
Again Same Date of purchase : Feb 27, 2019
NAV : 18.0472
Units alloted : 554.103 (= 10,000 / 18.0472)
Again Same Date of sale : Sept 1, 2021
NAV : 28.4554
Value : Rs.15,767 (= 554.103 * 28.4554)
Again Same Profit : Rs.5,767 i.e. 19.87%
NAV of Nippon India Index Fund Nifty Plan was nearly double the DSP Nifty 50 Index Fund.
Yet, both gave practically the same returns.
All these funds delivered the SAME RETURNS because their underlying portfolio was exactly the SAME 50 STOCKS that comprise the Nifty Index and in the same proportion. [Note: The small difference is due to tracking error and small variation in the expense ratios of the funds.]
In short, NAV is Irrelevant, Immaterial and Inconsequential when you are buying (or selling) your MF units.
Want to see WHY?
Because, unlike the price of onions, potatoes or shares, NAV is not the "price" in that sense. Rather, it is an "average" based on the prices of the underlying stocks in the portfolio and the total corpus of the fund.
And, two average numbers cannot be compared in the same manner as you compare two prices.
For example,
Average of 5, 5, 5, and 5 is 5.
And Average of 10, -2, 4 and 8 is also 5.
Yet, the two underlying series are totally different.
Therefore...
... it is meaningless to say that Rs.10 NAV Fund is cheaper than Rs.100 NAV Fund. It is like saying that Sachin Tendulkar is better than Albert Einstein. The two simply cannot be compared.
Therefore...
... ultimately what matters is the "quality" of the fund; no matter what NAV you invest at or whether it is NEW FUND or a very OLD FUND.
Therefore...
... what is relevant is the "Portfolio" of the Scheme... which DOES NOT EXIST at the time of NFO.
... what is relevant is the "Performance" of the Scheme... which is ABSENT in an NFO.
... what is relevant is the "PE & Expense Ratios" of the Scheme... which are UNKNOWN in an NFO
... what is relevant is the "Corpus" of the Scheme... which is UNCERTAIN in an NFO.
... what is relevant is the "Fund Manager" of the Scheme.
... what is relevant is the "Asset Management Company" of the Scheme.
Therefore...
... these are the parameters that you must focus on when choosing which fund to invest in or redeem; and forget the Net Asset Value or the Age of the scheme.
Therefore...
... if anyone sells you a New Fund Offer saying that it is cheaper at Rs.10 NAV, he is MOST DEFINITELY cheating you. Beware of such people trying to make a fool of you.
Last, but not the least...
Whatever equity fund it may be, lump-sum investment is (almost) never desirable. By investing a large amount on a one-time basis in an NFO, you are forgoing one of the best tools to minimize the high volatility risk in equity i.e. SIP (Systematic Investment Plan).
So, even if it may be the best of the best fund offer, the most logical thing to do is to skip the NFO; and start a SIP once the scheme is open for subscription.