NFO (New Fund Supply) - Components to contemplate earlier than investing in NFO
Might 1, 2021
NFO stands for New Fund supply. It’s like inventory IPO. In IPO new inventory is launched for the primary time funding. Whereas in new fund supply mutual fund is launched for the investor by the mutual fund corporations for the primary time. The NFO stays open for mounted time period. NFO value in mutual fund is usually mounted at Rs.10 per unit. On expiry of NFO interval the fund is listed out there. After itemizing of mutual funds investor should purchase fund from the open market. NFO are typically out there at greater value after itemizing.
Varieties of NFO
Open Ended Funds
Open Ended funds is out there for all of the buyers. Below this class the buyers and NFO subscribers can promote/redeem their mutual funds unit anytime. Exit load is relevant on the sort of funds. No lock in interval relevant.
Closed Ended Funds
Closed Ended funds can be found with mounted interval 3-5 years. Investor can not exit closed ended fund earlier than specified lock-in interval. Within the easy phrases closed ended mutual funds have particular tenure and stuck maturity interval.
Components to contemplate earlier than investing in NFO
It’s best to take into account following components earlier than making funding in NFO.
Fund Home Fame
Fund home status is utmost essential earlier than investing in NFO. The fund home the place you’re investing your cash ought to have historical past of working in mutual fund trade a minimum of for 5-10 years. You possibly can analyze the efficiency delivered by the fund home in numerous mutual funds in the identical class. This will increase your probability of getting greater returns from fund.
Theme of Fund
Theme of fund is one other essential issue to contemplate whereas making funding. There are lots of themes out there out there. The theme the place you’re investing your cash ought to be evergreen and sustainable for the long run. It’s best to take into account fund for the time interval of a minimum of 5 years.
Fund goal
Fund goal is subsequent issue to contemplate whereas investing in NFO. The fund goal comprises data resembling asset allocation, threat and different issues. It’s best to rigorously research fund goal earlier than investing in NFO. The fund goal assist you to know that what fund supervisor is predicted to do along with your invested cash.
Return Potential
It’s best to verify return potential of comparable funds already out there out there. The NFO prospect doesn’t inform something about return nevertheless, you’ll be able to set anticipated returns based mostly on fund goal and different parameters.
Danger Issue
You also needs to take into account threat issue whereas investing NFO. New fund doesn’t have fund efficiency historical past this implies it will likely be troublesome so that you can predict fund efficiency and related threat. The fund could offer you higher return or could find yourself making losses.
Minimal Subscription quantity
The fund supply doc comprises details about minimal subscription quantity. The quantity is in vary of Rs.500 to Rs.5000. If minimal subscription quantity is greater in comparison with what you’ll be able to make investments you need to take into account SIP choice for funding as a substitute of lump sum funding.
Market Situation
Market Situation is one other essential issue whereas making funding. The market situation ought to be secure or non-volatile whereas making funding. Chances are you’ll find yourself making losses in close to time period if you don’t take into account market situation whereas investing in NFO.
