Want to invest in a New Fund Offering or NFO? The time is just right! After a three-month lull period, NFO mutual funds are not back with a bang from July 2022, with over 24 new funds being launched in July itself! As an investor, you are likely to be spoilt for choice! If you are new to the concept of NFO and unsure about the meaning and how these funds to function, your AMC or Asset Management Company should ideally begin with a basic introduction.

What are NFOs? 

They are somewhat similar to IPOs floated by private companies where shares are offered for public sale for the very first time. Unlike IPOs however, the funds collected through the sale proceeds are utilized by MF houses for purchasing securities and for building a portfolio by the fund objectives. Money raised through IPOs is used for the business expansion of the company itself. 

When you check the prices of NFO mutual funds online, you will find that generally, the launch price is about Rs. 10 per unit. The subscription is available only for a limited period. Once the subscription period expires, investors can continue to purchase units at a price point that is higher than the introductory price. 

Why Should You Invest in a New Fund Offering?

Next up, your AMC should explain to you why investing in one of the latest NFOs in mutual funds may be a good idea. Some of the advantages they should highlight include:

It offers exposure to a fresh investment scheme that provides the opportunity to mop up clean profits during the early stages of investment. 

An NFO can play a significant role in diversifying your portfolio way beyond the scope of Indian Stock Markets. For instance, you can perhaps choose to invest in NFO index funds mirroring the index of foreign stock markets like S&P 500 or Nasdaq 100, quite easily! 

How to Invest in a New Fund Offering?

Your AMC should guide you about the ways by which you can invest in New Fund Offerings. Primarily, there are two ways to invest:

The Offline Mode: Invest through a broker or distributor or Asset Management Company. The broker company will assist you in filling out relevant forms and submitting documents.  

The Online Mode: The online method is through your trading or Demat account. AMCs also float online platforms that can be used for buying the latest NFO in mutual funds, while enjoying the comforts of your home. These platforms help in selecting offers that are currently open and make investing in them simple and easy. 

It is important to check the expense ratio of the fund before investing. AMCs should explain to you that when it comes to NFOs, a significant amount of money goes into marketing campaigns and advertising. This jacks up the expense ratio. And, when you invest in a fund with a high expense ratio, it can compromise your returns over the long term!