NFO vs Existing Fund Calculator
NFO vs Existing Fund Side-by-Side Comparison
New Fund Offer (NFO)
Starting NAV: ₹10.00
Allotted Units: 10,000
End NAV (5 Yrs): ₹17.62
₹1,76,234
Existing Peer Fund
Starting NAV: ₹150.00
Allotted Units: 666.67
End NAV (5 Yrs): ₹264.35
₹1,76,234
The NAV Value Myth Busted
Many retail investors believe a low NAV of ₹10 is "cheaper" and allows you to buy more units, leading to higher returns. As shown above, because the percentage growth is identical, you get the exact same final valuation. NAV size does not impact returns; focus instead on expense ratios, fund manager history, and index tracking accuracy.
What to do next
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NAV Neutrality Formula
Illustrates that NAV size does not affect returns; if return percentage is equal, final wealth is identical.
Worked Example: ₹1 Lakh invested in NFO (₹10 NAV) vs Peer (₹150 NAV) at 12% return for 5 years
NFO NAV Myth: How Ramesh Learned that a ₹10 NAV is Not a Bargain
Ramesh saw an advertisement for a New Fund Offer (NFO) priced at ₹10. "It's so cheap!" he thought. "An existing peer fund has a NAV of ₹150. I can buy fifteen times more units in the NFO for the same ₹1 Lakh investment." He assumed more units meant faster growth.
He invested ₹1 Lakh in the NFO (10,000 units at ₹10) and ₹1 Lakh in the peer fund (666.67 units at ₹150). Both funds grew by 12% in Year 1. The NFO NAV became ₹11.20, and his value was ₹1,12,000. The peer fund NAV became ₹168.00, and his value was ₹1,12,000.
Ramesh got the exact same return. NAV is simply the book value of a fund's assets divided by units. A lower NAV gives you more units, but each unit represents a smaller slice of the pie. The growth rate of the underlying assets is what dictates your returns.
Don't buy NFOs under the impression that a ₹10 NAV is a bargain. Evaluate NFOs based on their unique theme, investment mandate, and whether they fill a genuine gap in your asset allocation. For standard categories, established funds with proven track records are always safer.
Frequently Asked Questions
Is a New Fund Offer (NFO) at ₹10 cheaper than an existing fund?
No. A lower NAV does not mean a fund is cheap. It simply means your investment is divided into more units. If both funds invest in the same index and grow by 12%, your final wealth is identical. NAV size has zero impact on compounding returns.
Why do mutual fund companies market NFOs at ₹10?
It is a psychological marketing tactic. Retail investors are accustomed to buying stocks, where a lower price can indicate a value bargain. AMCs use this bias to attract capital for new scheme launches.
Should I invest in an NFO or an existing peer scheme?
Choose existing schemes with a proven track record. Existing funds have historical portfolios, documented expense ratios, tracking error histories, and performance metrics across bull and bear markets, which NFOs lack.
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