Invest in New Fund Offers; the first time subscription offer for a new scheme launched by the Asset Management Companies (AMCs)
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A New Fund Offering (NFO) is when an asset management company (AMC) introduces a fresh mutual fund to gather capital. Investors can purchase units at a base price, typically Rs. 10 per unit. Much like an Initial Public Offering, an NFO lets you invest in a new fund before it hits the market. It’s a great opportunity to diversify your portfolio with innovative investment options and tap into future growth. NFOs can be open-ended, allowing you to invest or redeem anytime, or close-ended with a lock-in period. Managed by professionals, NFOs offer flexibility and can align with your financial goals.
An NFO is the launch of a new mutual fund scheme offered by an Asset Management Company to investors for the first time. Its primary objective is to collect initial capital from investors, allowing the fund manager to create a portfolio aligned with the fund’s investment goals. During the subscription window, investors can apply for units at a fixed price, typically Rs.10, similar to an Initial Public Offering (IPO). After the NFO closes, the mutual fund is listed, and units are traded at market prices.
NFOs provide a great opportunity for investors to enter a fund at an early stage. There are three main types of NFOs-
Investing in an NFO presents several advantages that can enhance your portfolio:
Before investing in an NFO, you must consider the following factors-
Here’s how to invest in NFO through Tata Capital Moneyfy-
Step 1- Start by downloading the Moneyfy app onto your device.
Step 2- Review top-performing mutual funds and choose the schemes that suit your investment goals.
Step 3- Use the built-in calculators to plan your financial growth.
Step 4- Invest in New Fund Offers (NFOs) from a range of asset management companies.
Step 5- Monitor your investments easily with the user-friendly portfolio tracker.
Like other mutual funds, NFOs are also taxable. If the equity allocation exceeds 65%, short-term capital gains (STCG) are taxed at 15%. Long-term capital gains (LTCG) up to ₹1 lakh are exempt from tax, but gains beyond this limit are taxed at 10%.
To select the right NFO, evaluate the fund's objectives, the AMC's reputation, the fund manager’s track record, and the expense ratio. Ensure the NFO aligns with your risk tolerance and investment goals, and compare it with existing funds before deciding.
The NAV of an NFO is calculated by dividing the total value of the fund’s assets by the number of units issued. Initially, the NAV is set at Rs. 10 and then fluctuates based on the performance of the fund’s underlying assets.
An NFO usually stays open for a few days to a few weeks, depending on the AMC’s decision. Once this period ends, new investments aren’t accepted until the fund becomes available through regular purchase options, if applicable.
In an NFO, the NAV is worked out by dividing the fund’s total assets (after subtracting any liabilities) by the number of units. It generally starts at a base value, often set at INR 10 per unit during the offer period.
You can usually cancel your investment during the NFO period. After allotment, if it’s an open-ended fund, you may exit anytime. For close-ended funds, you’ll need to wait until the fund reaches its maturity.