New Fund Offer (NFO) are mutual funds that manage your money. NFOs provide investors with a first-time subscription for a new investment scheme. This is a scheme launched by an AMC. Investors are soon beginning to utilise NFO as a highly profitable investment option.
NFO is generally launched in the market by an AMC with the main objective of raising capital from the public. The funds collected are utilised by the AMC for purchasing securities that include stocks, bonds, currencies, commodities, and debentures.
If you believe in mutual fund investments as a good option, then NFO is definitely one of the best investment choices in India. The fund managers operating NFOs constantly monitor the performance of the equity, debt, real estate, currencies, gold, and commodities markets. Thus, this helps the NFO fund managers improve the returns potential of the investors’ portfolio by identifying key growth areas for investing the funds.
Why should you invest in NFO?
NFOs provide investors with the opportunity to make either a one-time lump-sum investment or to go in for monthly SIP investment. The fundamentals of NFO investment are very clear. If you invest a lump-sum of Rs. 120,000 at Rs. 12 per unit, the AMC will offer you 10,000 units in the NFO. These units can be traded in the open market by you at the existing NAV in order to book profits or for reinvesting.
If you invest in a tax savings NFO, then you will not only get the equity market benefits but will also save on taxes. You can invest in a NFO either through making a close-ended or an open-ended application. In case of a close-ended NFO application, there will be a start date and end date of the NFO. The NFO units are purchased by you at the NFO price itself. However, this changes completely when it comes to investing in an open-ended NFO because there is only a start date. Hence, an investor that purchases the NFO units in an open-ended fund after the start date will have to purchase the units only at the NAV and not the NFO price, as in case of a close-ended fund.
As an investor, always keep an eye for good NFOs in India, especially during the tax period between January to March since AMCs tend to float good schemes during this time.
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Mutual fund investments are subject to market risks. Please read the offer document carefully before investing