Hi there! Welcome to Gift-Nifty, where you can explore what is NFO in a Mutual Fund. It is important to know about New Fund Offering (NFO) if you own mutual funds or want to buy them.
If you want to buy stocks, you can do an Initial Public Offering (IPO). If you want to buy mutual funds, you can do an NFO.
You can put money into a mutual fund plan when it first starts up with NFO. We will talk in-depth about NFO in mutual funds in this post.
NFO in Mutual Funds
A new fund offer is what NFO stands for in this case. It is the start of a new joint fund plan.
When an Asset Management Company or fund house releases a new mutual fund scheme, it uses NFO to let anyone buy units in that scheme.
In the NFO, information about the plan, the types of securities to be bought, the fund manager, and other things are given.
Mutual units in this sale can usually be bought for ₹10 each. When the NFO goes live, it is sold on the market based on the NAV.
Types of Mutual Fund NFOs
Three types of Mutual fund NFOs are as under:
Open Ended Funds
With an open-ended mutual fund, you can join or leave the plan at any time.
You can give money to the plan at any time and get your money back at any time.
The open-ended funds have a lot of cash on hand. Even after the NFO time is over, you can still buy units in the funds at their current NAV.
Close Ended Funds
Closed-end funds are only good for a certain amount of time. During the NFO term is the only time you can put money into close-ended funds.
After the NFO time is over, there is no longer any way to invest in the scheme. After the scheme goes public on the stock market, you can get your money back.
Interval Funds
One kind of closed-end fund is an interval fund. But in this case, buyers can put money in and cash out units at regular times.
This time period, which can happen once a year or every six months, lets buyers trade funds.
NFO Process in Mutual Funds
Now that you know what NFO is, let’s look at how it works in mutual funds:
- When a fund house or AMC starts a new mutual fund plan, this is called an NFO.
- The units can be bought by investors during this time at an original offer price. The price is very low, about ₹10 per lot.
- When the NFO period is over, buyers can trade their units back into cash at the exchange. They can even get more units. The current NAV of the plan is used for these deals.
- The fund manager is in charge of spending the money raised through the NFO in different assets that meet the goals.
Pros & Cons of Investing in NFOs
Let’s go through the Pros and Cons of investing in NFO:
Pros
- NFOs let people put money into funds that have just been started. This could be a good chance for buyers who want to put money into a fund at a good rate.
- Most of the time, NFOs are sold at a set price. For this reason, you can put less money into it.
- When NFO comes out, it brings new ways to spend. This lets you spread out your investments.
Cons
- Since the funds are still new. That means it has no past. Without knowing how the plan has done in the past, it’s hard for investors to judge it.
- Investors have to pay a fee to each fund. These fees can be high at times, which can hurt your total returns.
Also Read: How To Invest in Mutual Funds
Is It Good to Invest in NFO Mutual Funds?
Each trader must decide for themselves if they want to put money into NFO. In case you like taking chances and investing in new things, NFO might be a good choice for you.
It’s also good for people who want to make money in the long run. People like this can put their money into closed-end funds.
But before you decide to invest, you should think about your general investment goals and how much risk you are willing to take.
How to Apply for NFOs Online?
You can use the AMC website or online investment sites like Dhan to put money into NFO.
Sign in on a website or a phone app to do this. You will be able to choose to invest in the current NFO. Choose the NFO and use it.
Conclusion
When it comes to mutual funds, NFO is like the grand opening of a new investment opportunity. During the NFO time, investors can buy units in a new fund at a fixed price, usually ₹10 each, before trading starts at the market rate. NFOs offer a chance to broaden portfolios early on. There are different types, such as open-ended, close-ended, and interval funds, and each has its own rules for investing and withdrawing money. There is a chance to make money quickly with NFOs, but there is also the risk of investing in something that hasn’t been proven to work before.
So, investors should carefully weigh the pros and cons, taking into account their own financial goals and level of comfort with risk, before jumping in. They can easily apply for NFOs through websites like the AMC’s or investment apps like Dhan. This way, they can make sure that their NFO investments are in line with their general financial goals.
FAQs
What is NFO in mutual funds?
NFO stands for New Fund Offering, which is the launch of a new mutual fund scheme.
How do I invest in NFO?
You can invest in NFO through the AMC’s website or online investment platforms like Dhan.
What types of NFOs are there?
There are three types: open-ended funds, close-ended funds, and interval funds.
Can I withdraw my money from NFO anytime?
It depends on the type of NFO; open-ended funds allow you to join or leave anytime, while close-ended funds have a fixed term.