2 Replies to “Purchasing MF from 2ndary market vs initial public offer – which is better kindly explain.?”

  1. it’s better to go with the ones that has been in business the longest and know what their doing.
    this will save you money and time invested

  2. As stated earlier, the best option to choose a MF is through the secondary offer.

    Several reasons can be attributed towards this reasoning:

    (a) The Fund Manager and his history to survive in bear markets can be easily determined in a secondary offer fund.

    e.g., HDFC Prudence is managed by one of the best managers in India for a period of 13 years or so. This fund performs extremely well in both good and bad markets. This kind of history is hard to fathom in a new NFO fund offer.

    (b) Some fund companies strive to make certain funds extremely popular.

    e.g., Reliance Growth, SBI Magnum Contrafund, HDFC Equity, Franklin Prima, etc

    In all of these funds, there has been management changes. However the fund performance did not skip a beat even after the managers took a hike.

    (c) Thirdly, the odds of success with a NFO is 50/50, but with a well chosen existing fund, the success rate can be as high as 95%

    I have invested in NFO offers myself. I enrolled in

    (a) Reliance Equity – I enrolled in this fund in last April, because the market was frothy and this Fund was India’s first ever fund to hedge itself against F&O positions. Therefore, this fund promised to protect in a bear market.

    I subscribed out of this fund very recently because the Fund did not match upto my expectations.

    (b) Franklin Flexicap – When I subscribed to this NFO, I guessed this fund to be a balance between Franklin Blue Chip fund and Franklin Prima. I still hold this fund as its performance has been superlative and upto my lofty expectations.

    Therefore you can see it is hard to second guess on a NFO. It may or may not work. And if it does not work, you better make sure that there are atleast 1 or 2 good funds in that Fund family that you can switch into without paying any load.

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