Learn with ETMarkets: New Fund Offer (NFO) of mutual funds

A new fund offer (NFO) is a first-time subscription provide for a brand new scheme that has been launched by an asset administration firm. The fund house can launch an NFO round a theme or just to finish their product basket. Once the NFO is over, the fund will reopen for subscription once more and buyers have the choice to subscribe on the prevailing web asset worth (NAV)

Difference between a mutual fund NFO and an equity IPO:
An fairness IPO is completed by a single firm, which frequently seeks capital for growth or to provide an exit to an present investor. On the opposite hand, an NFO from a mutual fund collects cash from buyers and allocates that to a basket of securities (shares or bonds or authorities securities and so forth), based mostly on a acknowledged technique.

Does it make sense for buyers to go for a mutual fund NFO?
Every particular person ought to consider their portfolio earlier than including any new scheme. Financial planners really feel buyers ought to spend money on an NFO if it matches of their portfolio, or there’s a theme which will be performed by the brand new fund provide. Investors ought to keep away from funding in an NFO merely as a result of the NAV begins at Rs 10. Many a time there may be mis-selling by distributors, who evaluate such schemes to open-end schemes which have larger NAVs, which is fallacious. Financial planners imagine buyers ought to desire open-ended schemes, which have monitor document. In an present scheme, the portfolio and fund supervisor’s fashion of investing and previous document will be simply evaluated. In an NFO, the investor solely will get to know later the portfolio and its fashion of administration.