New issues always create excitement. When a new stock is first issued for investment, it is an IPO, whereas when a new fund offer is made, a new mutual fund is launched by an asset management company (AMC) for the first time. While both IPO and NFO are launched primarily for the purpose of raising capital, the two should never be confused.
When an AMC or mutual fund announces a new scheme to raise capital it is called NFO. This allows the public to invest in the pool for the first time. The funds raised are primarily used to invest in securities such as bonds and equities.
is offered by nfo AMC Or MF only for a specific period at a specified price known as offer price. During this period, investors can buy units of the new scheme at the offer price which is usually fixed 10. Once this period is over, the new mutual fund scheme is listed and once listed, the units of the scheme can be purchased at the commanding Net Asset Value (NAV) of the fund.
NFO is launched with a new idea or theme due to which it is not possible to see past performances or predict future. However, one can look at the past performance of similar funds to get a rough idea.
Since it is difficult to predict how an NFO will perform and unlike companies that launch IPOs, the funds are not evaluated or analyzed by experts to make this decision easier. So let’s take a look at some of the basics before investing in the new fund offer:
fund house
The reputation of a fund house is very important. An investor should not invest in NFO of any fund house which has a volatile history. It is important that the fund house is in the industry for at least 5-10 years and has investor confidence.
Before investing in NFO you should check the past track record of the fund house as well as the fund manager. You can also analyze the past performance of similar funds launched by the fund house. The better the fund house, the higher your chances of getting better returns.
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