Mutual funds are a popular investment option, given their wide range of benefits. Mutual fund investments are also a great way to diversify your portfolio. However, lately, there has been a lot of buzz surrounding NFOs, short for new fund offers. It has been observed that anytime a mutual fund company is set to introduce an NFO, there is a lot of excitement in the marketplace.
The average investor is often caught between the NFO hype and existing funds with good past records. “Is NFO good for investment?” “Should I invest in NFO?” “Is it good to invest in NFO?” “Is NFO profitable?” “What is the difference between NFO and Mutual fund?” – This article aims to provide answers to all these questions.
NFO stands for 'new fund offer.' It is a fresh mutual fund plan that is being provided to the public at large in the financial marketplace. In other terms, when investors are given a new mutual fund plan with a new investment strategy for the very first time, it is called an NFO. Asset Management Companies (AMC) may also offer these NFOs as fresh mutual fund offerings that were not formerly accessible in the asset mix.
NFO offerings have recently flooded the market. But should we invest in NFO? Is it good to invest in NFO? Is NFO good for investment? Or are the existing mutual funds a better alternative?
Whenever you are asking the question – “Is it good to invest in NFO?” or “Should I invest in NFO?” you should first understand the downsides of the fund first.
This could be compared to an IPO of a stock. The initial price is kept low for early investors, whereas the price is expected to rise. However, there is no guarantee as the NAV is subject to market movements.
Now, let’s decipher “why is it good to invest in NFO offerings?”
Existing mutual funds have the advantage in terms of information and performance, but NFO provides a new marketplace. Investing in NFOs can prove advantageous if you conduct your research on the fund. To reap the advantages of NFOs, interested investors must first grasp what they are. These new funds have gained in popularity over time, particularly in terms of number and quality. Before participating in an NFO, consider the fund house's credibility, the fund's objectives, the prospective returns of similar funds already available on the marketplace, your investment goal, and the lock-in period for close-ended new funds. Although NFOs have the ability to be tremendously successful, expecting every new fund to achieve this is unreasonable.
NFOs are classified into two types: open-ended new funds and close-ended new funds. The former category allows the investor to withdraw money from the fund at any given point while the latter comes with a pre-set maturity period before which the investor will not be able to withdraw any money.
This new fund offers fresh investment routes with profit potential from the impending market changes. These NFOs are open and accessible to the general public for a very limited period, within which the investors need to participate at the set offer price. After the period ends, the NFO will be available, but new investors need to buy the units at a higher set price.
Now, let’s get into the difference between NFO and Mutual funds.
Every mutual fund scheme begins with an NFO. As it grows older, its history begins to accumulate. An existing mutual fund contains a portfolio, which allows you to examine what the fund has previously invested in and how it performed in rising and declining marketplaces. Therefore, an NFO is similar to a fresh beginning in that you only know the person who will be handling your investment and you purchase a plan that the fund promises. This is the difference between NFO and mutual funds.
So, is it good to invest in NFO? Now, a large portion of a fund's success is largely reliant on its beginning position. If the plan is launched while the marketplace is down and then rises, it will perform nicely, and vice versa. So, if you understand the NFO vs Mutual Fund problem and the market situation, you will be able to make smart decisions.
Here is a list of newly launched NFOs:
Name of the Scheme | Opening Date | Closing Date | Offer Price |
AXIS NASDAQ 100 Fund of Fund - Regular (IDCW) | 07-10 | 21-10 | 10 |
AXIS NASDAQ 100 Fund of Fund - Regular (G) | 07-10 | 21-10 | 10 |
ICICI Pru Transportation and Logistics Fund-Reg (IDCW) | 06-10 | 20-10 | 10 |
ICICI Pru Transportation and Logistics Fund-Reg (G) | 06-10 | 20-10 | 10 |
LIC MF Multi Cap Fund - Regular (IDCW) | 06-10 | 20-10 | 10 |
LIC MF Multi Cap Fund - Regular (G) | 06-10 | 20-10 | 10 |
A mutual fund is a reliable and safe investment opportunity. People invest in mutual funds because they can afford to take risks while they cannot afford to lose their hard-earned money. Mutual funds are easy to open and maintain accounts with, requiring fewer costs and minimal paperwork to start investing. If your goal is long-term wealth building, mutual funds will help you diversify your portfolio and create your own financial independence.
Hopefully, this article was able to answer the question – “Is it good to invest in NFO?” Like all investments, there are pros and cons to investing in NFO schemes. If you can make your way past the risks and into the unknown, then you just might be on the road to a healthy financial future. Make sure you understand the “NFO vs mutual fund” debate before investing. If you decide to participate in these funds, you can invest in Mutual Funds through Tata Capital's Moneyfy.