“Don’t buy an NFO because it’s new. Buy it because it fills a gap in your portfolio,” Salim said.
He added that investors should first review their existing holdings before considering a new fund, as an existing product may sometimes offer similar exposure.
Among this week’s launches, Salim prefers the Aditya Birla SL BSE Total Market ETF for equity exposure and the Nippon India CRISIL IBX FAR Gilt ETF for debt allocation.
Total Market ETF for broad equity exposure
Salim said the Aditya Birla SL BSE Total Market ETF provides exposure to a broad section of the listed equity market.
He said this could make it suitable for first-time or passive investors who do not want to separately allocate money across large-cap, mid-cap and small-cap funds.
“If Nifty 50 is India Inc, then the Total Market Index is India Ltd,” he said, describing the breadth of the index.
FAR Gilt ETF for debt allocation
On the Nippon India CRISIL IBX FAR Gilt ETF, Salim said the product gives retail investors exposure to government securities available under the Fully Accessible Route (FAR).
He said the ETF provides sovereign-backed exposure and is suitable for investors with a three- to five-year investment horizon.
Salim cautioned investors against buying the ETF simply because of India’s inclusion in global bond indices. Instead, he said the investment case should be based on stable income and the possibility of capital gains if bond yields decline over time.
Contra fund needs patience
Discussing ICICI Prudential’s Contra Fund, Salim said contra investing requires patience and is better suited to experienced investors with a seven- to 10-year investment horizon.
He advised investors to compare the fund manager’s investment approach, historical performance and risk-adjusted returns with existing contra funds rather than investing simply because the product is new.
Other NFOs on his radar
Salim said WhiteOak Capital’s Diverse Equity Small Cap Active Fund of Fund offers diversification across multiple fund managers and investment styles. However, he cautioned that investors also need to consider the additional layer of expenses and potential overlap between the underlying portfolios.
For Mirae Asset’s Lifecycle Fund 2056, Salim said the product could suit younger investors planning for retirement because it automatically reduces equity exposure as the target date approaches.
On Mahindra Manulife’s Specialised Investment Fund (SIF), Salim said the category is aimed at affluent investors who understand derivatives and want an alternative to traditional mutual funds.
He described SIFs as a bridge between mutual funds and portfolio management services, or PMS, and advised first-time investors against using them as a core portfolio holding.
Salim said the Aditya Birla SL BSE Total Market ETF is his preferred equity launch of the week because of its broad diversification and passive approach. For debt, he prefers the Nippon India CRISIL IBX FAR Gilt ETF, while he sees the Mirae Asset Lifecycle Fund as a potential option for long-term retirement planning.
Summing up his approach, Salim said: “NFO is not an opportunity. It’s merely an option.”
For the full interview, watch the accompanying video
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