Raghunandan Money – Investment Khushiyon Ka.

Factors to consider before investing in NFOs.

Published : May 21, 2024

The term NFO can be new for most of the investors as the world of investing can have unfamiliar terms. New fund offer also known as NFO is the new fund of the mutual funds which is launched by fund houses. NFO mutual funds allow new investors to enjoy the unique opportunity to invest in newly launched funds that are ready for market launch. Here you’ll get the idea of NFO, its meaning and the key considerations to be kept in mind while investing in a new fund. 

What are NFOs? 

NFO- means New Fund Offer in the mutual funds and investment world. In simple terms, it means the launch of a new scheme by an asset management company or fund houses. Through NFOs, the investors get a unique opportunity to take part in the newly launched fund schemes in the market.  These new funds are active in the market for 30 days maximum. NFOs are the best example for attracting good investing opportunities thereby increasing the returns of the portfolio. 

Who should invest in NFOs?

NFOs are available at a lower cost than the fund’s net asset value, that’s the reason it is considered a good investment option for investors. The fund houses take advantage of investor’s thoughts and make a profit over these funds. If the objectives of the fund, investment perspective, and the risk-return profile align with the investor’s investment goals. 

What are the factors to consider before investing in NFOs?

The introduction of NFOs in the market creates excitement and also elevates market sentiments. The market is full of numerous NFOs, which can make it difficult for investors to choose from. Hence, it is crucial to check for the key factors before investing in NFOs. Let’s check some of them:

Reputation of the fund house: Before jumping into NFO investment, the one thing that should be kept in mind is the reputation of the fund house. The fund house that has constantly launched good mutual fund schemes and holds a great historic performance record will surely attract lump sum investors. Thus the goodwill of the fund will boost the confidence of the investors that they might enjoy potential returns. 

Investment period and amount: NFOs are launched with a fixed lock-in period, which might differ from investors’ expectations and objectives. Therefore it’s always advisable to check for NFOs that are launched within the expected horizon. The minimum investment amount of NFOs might differ from the price it was initially launched. Hence it’s important to check the parameters like investment amount or investment horizon whether they align with the investment objectives of the investors. 

Objective of the NFO: Always check the objectives of the fund, before you decide to invest in them. The main objective of NFOs is to select the framework it will follow to choose the asset or locate those funds that will generate better returns. The investor’s risk tolerance should align with the objectives of the funds to enjoy a profitable portfolio. Understand the objectives before investing in NFOs. 

NFO theme: Checking the theme of NFOs is crucial if you want profitable returns. NFOs are based either on capital appreciation, valuable investing, and growth purposes. If the theme of the NFOs matches your purposes then you can surely go with it. 

Other Key factors: Apart from all these factors, the investors should also check the fund manager’s details for instance his experience and expertise. And the SID- Scheme Information documents and the risk tolerance of the investors. 

Conclusion: No doubt NFOs are an incredible way of growing your portfolio returns. Let’s not forget that investors need to have careful consideration before investing in them. NFOs include funds that are more dynamic and they provide investment at a faster pace. Investors should always check for all these key considerations before selecting an NFO. This will eventually help you to make more informed decisions and also unlock your earning potential. 

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