BOOM

Trending Searches

    Boom VIP
    BOOM

    Trending News

      • Fact Check 
        • Fast Check
      • Law
      • Explainers
      • News 
        • All News
      • Decode
      • BOOM Reports
      • Media Buddhi 
        • Digital Buddhi
        • Senior Citizens
        • Videos
      • Web Stories
      • Boom Verified
      • Workshops
      • Videos
      • Home-icon
        Home
      • About Us-icon
        About Us
      • Authors-icon
        Authors
      • Team-icon
        Team
      • Careers-icon
        Careers
      • Internship-icon
        Internship
      • Contact Us-icon
        Contact Us
      • Methodology-icon
        Methodology
      • Correction Policy-icon
        Correction Policy
      • Non-Partnership Policy-icon
        Non-Partnership Policy
      • Cookie Policy-icon
        Cookie Policy
      • Grievance Redressal-icon
        Grievance Redressal
      • Republishing Guidelines-icon
        Republishing Guidelines
      • Fact Check-icon
        Fact Check
        Fast Check
      • Law-icon
        Law
      • Explainers-icon
        Explainers
      • News-icon
        News
        All News
      • Decode-icon
        Decode
      • BOOM Reports-icon
        BOOM Reports
      • Media Buddhi-icon
        Media Buddhi
        Digital Buddhi
        Senior Citizens
        Videos
      • Web Stories-icon
        Web Stories
      • Boom Verified-icon
        Boom Verified
      • Workshops-icon
        Workshops
      • Videos-icon
        Videos
      • Home
      • BOOM Money
      • Personal Finance
      • New Fund Offers Or NFOs: All You...
      Personal Finance

      New Fund Offers Or NFOs: All You Need To Know, And Should You Invest?

      If the NFO ticks all the right boxes and appeals to your risk and returns appetite, investing in it may be the right choice

      By - Mohammed Kudrati | 27 Dec 2021 9:32 AM GMT
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
    • New Fund Offers Or NFOs: All You Need To Know, And Should You Invest?

      A New Fund Offer [NFO] is when a mutual fund company launches a new mutual fund scheme. The company declares the new scheme to raise capital from investors to put in the pooled money in a basket of securities they wish to invest in — stocks, bonds, and other financial instruments. As an investor, you get to subscribe to the freshly minted mutual fund scheme for a relatively small sum of money.

      When an NFO is first launched, the mutual fund house provides a subscription offer price of ₹10. The money collected during the timeframe is used to buy financial securities listed on the stock exchange after thorough analysis and research by the fund manager and the team. An NFO, when launched, remains active in the market for at least a month. Once the subscription offer of the NFO closes, all trades are then based on the Net Asset Value (NAV) of the fund.

      The central premise of investing in an NFO is the opportunity of buying fund units at a low, nominal cost. If you believe that the fund could generate better returns post the listing, it can be a good idea to invest in the NFO. It can give you access to an emerging economy sector and may also give you the ability to diversify your portfolio.

      Also Read: Explained: Investing In Mutual Funds To Meet Short Term Goals

      What sorts of NFOs are available?

      Regarding NFOs, there are two types of funds you may want to know about.

      • Open-ended funds: Most mutual funds issue this type of NFO. Through this NFO, you can purchase mutual fund units before the NAV is determined. You can choose to buy any number of units that the fund issues. Also, you can enter and exit the fund at any time.
      • Close-ended funds: These funds only provide fixed units during the NFO. That means you can buy these funds only during the NFO subscription timeframe. There is no opportunity of purchasing the units after the NFO closes, neither can you exit from the fund until it matures.
      Also Read: What Is A Systematic Investment Plan Or SIP: 5 Things To Know

      What should I look out for before investing in NFOs?

      • For one, look into the reputation of the Asset Management Company [AMC]. The fund house's reputation and history can be a good indicator of how the NFO is likely to perform. Going through the fund house's other fund schemes will help you understand how the funds are performing during market cycles.
      • Another vital factor to study is the portfolio manager's credentials. Conduct a background check of the fund manager to know about the funds they've actively managed.
      • To get a better insight into the NFO, know more about the fund's objectives through its offer document. For one, it reveals asset allocation, expected returns, risk profile, liquidity and other essential factors. It also spells out the investment process for the NFO across the investment horizon. This document allows you to understand what the fund manager will do with the pooled money.
      • dentifying the overall cost involved can also help you estimate the returns from the NFO. For instance, there may be no entry load to the NFO. But at the time of redemption, you may be charged a hefty exit load before you complete the tenure. Also, look into the fund's expense ratio, which is the annual fee charged by the AMC to manage the pooled money.
      • Get to know the minimum subscription amount to invest in the NFO. Regarding close-ended funds, learn more about the investment phase that comes in with a lock-in period.

      Also Read: What Is Goal-Based Investing, How Can It Help You Create Wealth?

      Does investing in NFOs make sense?

      One way to start is to read beyond the marketing campaign of an NFO. Of course, you may see literature on how the NFO could present an opportunity for exceptional returns. But before you invest, you need to be wary that there is no proven track record of success.

      Also, NFOs do not work like IPOs. That means you may not have an advantage of investing during the NFO subscription timeframe. Besides, the launch timing of the fund could be for several reasons. Perhaps the AMC is looking to complete the product basket or address the demand in the market for a specific type of fund.

      To make a thoughtful decision, you would need to spend some time poring over financial news sites, press releases, analyst reports, and similar data that could give you some insight into whether the NFO is a sound investment opportunity.

      It would help if you also examined the fund's expense ratio and monitored the performance of other mutual funds offered by the fund house launching the NFO before investing in it. Like every investment, there is no precise way to predict with absolute certainty if the NFO would be a successful scheme in the future.

      Also Read: Explained: Should You Invest In Tax-Saving ELSS?

      This story is a part of BOOM Money's series on personal finance

      Tags

      New Fund OfferNFOMutual FundSIP
      Read Full Article
      Boom

      Do you always want to share the authentic news with your friends?

      Subscribed Successfully...
      Enter Valid Email Id
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • Print
      • link
      Next Story
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • link
      • Facebook
      • Twitter
      • Whatsapp
      • Telegram
      • Linkedin
      • Email
      • link
      Our website is made possible by displaying online advertisements to our visitors.
      Please consider supporting us by disabling your ad blocker. Please reload after ad blocker is disabled.
      X
      X
      Or, Subscribe to receive latest news via email
      Subscribed Successfully...
      Copy HTMLHTML is copied!
      There's no data to copy!