What Is NFO In Investing, How Does It Work & its Features?
A New Fund Offer is a new investment option introduced by a fund house or asset management company (AMC).
NFO mutual fund schemes are Mutual fund investments that are either closed-ended or open-ended. In the case of closed-ended funds, an investor can only invest in them during the NFO period and then redeem the fund units following the lock-in period, whereas open-ended funds allow for unlimited entrance and exit.
Why do investors invest in NFO?
When you make an investment in an upcoming NFO, you must first choose the scheme being offered, then provide a few data and invest in the fund. Investors choose NFO mutual fund schemes to invest in for the long term and to purchase the fund at a lesser cost. Because of their novelty, NFOs or forthcoming NFOs will be valued cheaper than current funds in the market. While there are clear dangers with an NFO, such as a lack of a performance history or the inability to review the asset allocation, they may deliver good long-term returns provided they fit your investing goals and risk profile.
A New Fund Offer, on the other hand, has a relatively short investment lifetime of a few days. This means that you cannot invest in an NFO after this timeframe if it is a closed-ended fund, but you can in an open-ended fund. The NFO assists the fund house or AMC in raising funds from public investors in order to invest in market securities. Investors choose NFO mutual fund schemes when the market is performing well and they believe the New Fund Offer provides good value for money.
