Invest in an NFO only if it is unique!

By | July 10, 2011

There are a lot of things that you, as an investor need to understand is that, funds need to be invested only in those assets of which you have a proper understanding and are hopeful to gain good returns. The general rule is to not save all your funds in one asset; it can wipe out all your invested money on the eventuality of a poor market performance.

The hassle of getting into a loan and its repayment can take years, if it involves borrowing debt of a long tenor like a home loan, where the repayment can go as long as 15-20 years depending on the borrowed amount. In order to save yourself from such situations it is important that you get a good research of the assets available in the market. Then, make a list of all your financial goals and responsibilities that you need to achieve on a short term and a long term basis. The next step, link those goals to your funds and set the tenor accordingly.

With this you can finance all your requirements without getting into a debt. Another main important point that you must understand is that, if you want to invest in equities, it very important that you not opt a New Fund Offer (NFO). Invest in it after getting a good understanding if that fund is worth taking the risk. The reason is that the fund does not have the taste of all the market cycles. So you are not in a position to analyze its performance and capabilities of withstanding the market pressures.

If you believe that the fund has good chances of performing, then invest only a bare amount by which, if the fund does not perform better, you may not lose anything much. The success mantra of investing in an equities market is save your money through the SIPs route, not lump sum.

Try to build a good portfolio. Make sure you have a good mix of small cap, mid cap, large cap and hybrid funds in your basket. In this highly volatile market it is best if you could not opt for a new hybrid fund since the Price to Earnings Ratio is less and the market gets expensive. The safety of your invested amount will depend a lot on the decision made by your fund manager.

Evaluate the market; analyze all the pros and cons closely of any fund that you wish to invest in. Do not rely completely on your fund manager’s decision. Try to reason and question his moves, since it’s your money that is at stake.

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