You may have faced the experience of investment through the stock market via stocks, mutual funds, and bonds. However, on the other hand, another type of investment opportunity also exits that everyone is talking about. It’s a New Fund Offer. If this term is heard for the very first time, then this piece of article will guide you about what NFO is and how the process functions. By the time you finish reading this article, you will have information on selecting your best investment choices.
- Why do fund companies’ issue NFOs: There are a variety of reasons why fund companies launch NFOs. The most important reason would probably be the expansion of offerings to the public. A fund may introduce a new one based on a type of investor or targeting a particular sector or theme in the market. The idea behind an NFO is to let you invest in something that has the potential to grow with time.
- How Does an NFO Work: An NFO works exactly like any other mutual fund. You are buying units of the fund when you invest in an NFO. The difference is that the price at which you buy these units is set during the NFO period, and this price may be lower than the price once the fund starts trading publicly. Once the NFO closes, it opens for trading in the market.
- What to Consider Before NFO Investment: There are a few things to think about before you jump into any NFO. Consider the objectives of the fund. What is it trying to do? Is it a big-cap fund, an industry-focused fund, or focused on a specific geographical region? You’ll get a much clearer idea about whether it suits your investment strategy.
Compare the past performances of the comparable funds that were recently issued into the market. Past performances will not assure future returns, but the past will indicate how comparable funds performed in different conditions of the market. Finally, calculate the applicable fee structure from the NFO. The management fee is typically taken by most mutual funds and varies in some funds than in others. - Advantages of NFOs: An NFO comes with some benefits, though. Firstly, you can buy an NFO at a fixed price, which might be cheaper compared to the market price when it is listed. And this might present an opportunity for getting in early and maybe achieving better returns later on.
Another advantage is that most NFOs are designed for a specific kind of investment goal, say, growth or dividends. Thus, you can invest in a fund suitable to your financial goals. - Is an NFO Right for You: Investment in NFO is quite an exciting opportunity, but then it has to meet your investment objectives and risk profile as well. In case you are a first-time investor, then you may have much better success with starting an established fund that has a history behind its performance.However, if you do not mind the risks and dangers that come with investing in NFO, this is one of the excellent ways to diversify your portfolios by exploring new opportunities available for investing.
Conclusion
NFOs are something new and exciting for investors. Still, you should know the basic facts before investing. Learn about the fund, know what the fund is working for, and then get to know the risks associated with it. In the right way, you will make the best decisions and get more investments over time. You can open demat account free if you are planning to begin investing.
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