New Fund Offer (NFO)

 Updated on Dec. 6, 2022, 1:43 p.m.

The evergreen pool of money from various investors across the globe and used by the investors to buy the securities and this phrase is used in Canada, USA, UK, Australia and India. Under this process certain sum of money is gathered and invested in Bonds, Shares and Equities, Capital Markets, Money Instruments and others.

New Fund Offer (NFO) is one of the new Mutual Fund Scheme where in there is a first-time subscription offer launched by various Asset Management Companies (AMC). These are said to be launched to get the money from the public to buy Securities, Shares, Government Bonds from the markets.

The New Funds Offer is created for a limited period and you can go ahead and invest in the NFO units at the offer price that is INR 10 Per units.  Usually, the price is initiated by Asset Management Companies that are offering a new funds.

Under this scenario, the investors can purchase the Mutual Fund at a reasonable price say at INR 10 per unit and there are both Open Ended and Close Ended Mutual funds launched for a limited time period, after which these Mutual Funds are traded in the market based on their Net Asset Values (NAV).

Features of the Mutual Funds New Funds Offer (NFO)

There are various features of the Mutual Funds offer and they are given below as follows:

  • You can undertake the investment in new strategies and plans that will not be offered by other money instruments.
  • They allow the investors to invest in new investment programs and will not be understood by the recent Mutual Fund Schemes.
  • A close ended Mutual Fund will encourage the investors to select the schemes and also to invest the money in the financial markets.
  • A customer gets great flexibility at the time of investing the money in the Capital Markets and the Fund Manager is designated the task of holding your funds and invest them effectively.
  • It encourages the person to study the market fluctuations and rotate the money accordingly and encourages the person to be in the market for some time.
  • The liquidity is a greatest thing that comes with this package and one can also subscribe to multiple units once the scheme reopens.

Things to Analyse Before Investing In NFO

There are various factors coming to the fore, before you undertake the process of investing in the New Funds Offer and they are given below as follows:

  • NFO are the new in the markets and they do not have a good track record, hence measuring their performance history is the need of the hour.
  • Asset Management Companies (AMC) are placed in a good position to handle the market cycles.
  • Analysing the performance history of the newly appointed Fund Manager is also the need of the hour.
  • You must clearly analyse the scheme and understand its pros and cons before investing your hard-earned money into it.
  • NFO offers comes with documentations, giving details of the stock markets to be raised and helps in knowing risk factors.

How Does New Funds Offer Work?

Let us under the fundamental aspect of the New Funds Offer as it is a new Mutual Funds Scheme available for the public of India for the first-time subscription. The process revolves around activities of number of investors to go ahead and invest in various securities like Bonds, Shares and Debentures based on the conditions given in the schemes related documents.

When a new fund is made then it goes into the Asset Management or the Investment companies to launch and these new funds will have more excitement and marketing power compared to other financial instruments. Since you are a potential investor in the new fund you will get to analyse various kinds of securities in the funds, the profile of the fund manager and knowing about the company details.

Furthermore, you can find the New Funds Offer for the open-ended funds, and along with that for the open-ended funds, you will also invest in various units of subscriptions.

Let us analyse the two types of New Funds Offer like the Open-End Funds and the Closed End Funds.

  • Open Ended Funds: These types of NFO does not give any restriction on the number of the share that you can purchase. You can purchase and the sell the shares through the brokerage companies or online trading companies.
  • Closed Ended Funds: This fund is having certain restrictions and also limits the number of shares that one can purchase during a New Fund Offerings. You will purchase the close ended funds through the online trading account or using a brokerage companies.

Ways to Invest in a New Funds Offer

There are 2 means by which the user can go ahead and invest in a New Funds Offer. The process of investing in a New Funds Offer is a unified process and you can go ahead and choose various means of investment in an NFO.  Some of the methods of investment in a New Funds Offer are given below and they are:

  • Using a Broker: This is the finest method of investing in a NFO as you can reach the broker and they assist you to invest in a new fund offers. You must make sure that the broker is a certified and authorised one and helps in various tasks as you get the door step services regarding the NFO and its future implications.
  • Using the Online Trading Accounts: This is another form of investing and also very easy in nature and if you are investing in NFO, you must have online trading account. The online trading account can be used to do the investment and other activities on NFO. Furthermore, you can go ahead and track the Net Asset Value of the investment that has been made in the current scenario.

Companies Offering the New Funds Offer

There are various companies offering New Funds Offer and they are as follows:

  • IDFC Mutual Funds.
  • HDFC Mutual Funds.
  • Sundaram Mutual Funds.
  • ICICI Prudential Mutual Funds.
  • White Oak Capital Mutual Funds.
  • Franklin Templeton Mutual Funds.

If you invest in New Fund Offers, you can have various benefits and they will play a major role in wealth management and promising investment schemes. The user is advised to read the policy related documents and prospectus before investing their hard-earned money.

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