What Is NFO and How Can Investors Benefit from It?

Once a woman starts learning and managing her own money, she naturally becomes curious about newer financial concepts. The more she understands, the more she wants to explore different ways to grow her money. One such concept is NFO (New Fund Offer) a term that many women in our community have been asking about. So, in this blog we are going to cover NFO meaning, how does it work, and whether you should invest or not.

What is an NFO in Mutual Fund?

NFO stands for New Fund Offer, which is when a mutual fund company/Asset Management Company (AMC) launches a new scheme to the public, inviting them to invest. It’s like an IPO (Initial Public Offering) but for mutual funds instead of companies.

How Does an NFO Work?

– An NFO is how a mutual fund starts a new investment scheme. For a limited time, investors can buy units of the fund at a fixed price (like an IPO is open for 3 days and you can apply to the IPO only during those 3 days). 

– The money collected is then invested in different assets like stocks or bonds based on the objective of a mutual fund scheme. 

– Once the NFO period ends, the fund becomes available for regular investment at its Net Asset Value (NAV), which changes based on market performance.

– After the launch, new investors can buy the fund at the NAV price.

Should You Consider Investing in an NFO?

Before you dive into an NFO, consider this:

1. No Track Record: Unlike existing mutual funds, NFOs have no past data to assess performance.
2. Not Always a Better Deal: Just because it’s new doesn’t mean it’s cheaper or better.
3. Risk Factor: You’re investing without knowing how the fund will perform in real market conditions.

Ideally, it’s best to invest in existing mutual fund schemes since they come with historical performance data and other parameters to help you make informed decisions. On the other hand, NFOs are new schemes without any past data, making it difficult to assess their future performance.

Still wish to invest in NFO?

If you still wish to invest in an NFO, do your own research about the fund, check the objective of the scheme, parameters like fund manager, etc. and then make an informed decision. But make sure your investments align with all your goals, risk appetite, and time horizon.

If you wish to invest in existing mutual fund schemes, then you can check out Lxme app and invest in mutual fund, which are well-researched, diversified & expert-curated mutual fund portfolios.

While NFOs may seem exciting, they are not always the best investment option for everyone. If you’re a beginner, stick to tried-and-tested mutual funds that align with your goals. However, if you’re comfortable with a little risk and want to explore something new, you could explore investing a small amount after careful research.

Bookmark this blog for your future reference.

Comment “Invest” if you want to invest in expert-curated mutual fund portfolios.

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Further read:

• SGB Redemption Dates April to September: Process and Tax Guidelines

• 10 Reasons to Invest in Equity Market

• What is CDSL Easi and How to Register for It?