NFOs- Everything You Should Know Before Investing in NFOs

There is a plethora of investment options for the modern investor. From company stocks to bonds, you can invest your money in a wide variety of vehicles. 

But if you’re looking for a new and exciting opportunity that helps you earn high returns, it's time to explore NFOs. These unique investment avenues help you invest in a particular asset class or market and are ideal for those looking to diversify their portfolio.

To help you ascertain whether these are the right fit for you, this article explores what NFOs are, their types and points you should keep in mind when investing in these.

What are NFO Funds?

A New Fund Offer (NFO) is a first-time subscription offer for a mutual fund introduced by an Asset Management Company (AMC). The primary objective of an NFO is to raise capital through public investors. An NFO is essentially a new mutual fund that hasn’t been offered previously.

NFOs work similarly to Initial Public Offerings (IPOs) offered by companies. These mutual funds are also used to raise capital in exchange or scheme units.  These usually open for a limited period (15 to 30 days). During this time investors can subscribe to the fund. Once the period ends, the NFO units are allotted to subscribers.

What Are the Types of NFOs?

Now that you know what is an NFO, it's time to understand its different types. Here’s a look at these:

#1 Open-Ended NFOs: investors can trade units at the scheme’s prevailing Net Asset Value (NAV) at any time.

#2 Close-Ended NFOs: investors can trade units only during the initial offer period since these have a fixed maturity date.

#3 Interval Schemes: these are close-ended schemes that allow investors to trade at fixed intervals which can be annually or semi-annually.

Points to Consider When Investing in an NFO

After understanding what is an NFO in mutual funds, it is time to discuss some points to keep in mind when investing in these.

#1 The Objectives of the Scheme

Examine the scheme objectives to understand the portfolio construction, liquidity, investment strategy, risk factors, and expected returns on the NFO.

#2 The Cost of the Investment

NFOs usually have a subscription amount ranging from Rs 100 to 5,000. Make sure to check out the price before deciding on how many units you want to apply for.

#3 Your Financial Aspirations

It’s best to analyze your existing investments, liabilities and financial goals when investing in NFOs. This will help ensure your investment portfolio aligns with your big-picture financial aspirations.

#4 The Reputation of the AMC

Research the AMC launching the NFO and choose one that is reputed and has a stable history in the market.

Final Thoughts

NFOs are an attractive investment option for anyone who has a reasonable risk appetite and wants to drive their returns. Now that you know what is an NFO in share markets, it's time to discuss your next steps.

After all, as important as it is to know your investment options, it’s equally important to choose the right platforms to manage and track their performance. Fortunately, you can turn to the Tata Capital Moneyfy App. Discover top-performing mutual funds, insurance options and even loans- all in one single app.

Download the Tata Capital Moneyfy App today!