What is an NFO? How to invest in it? Benefits of investing in NFO
One of the smartest investment decisions that one can make is portfolio diversification. With the availability of so many investment instruments, investors have understood that betting on only one kind of investment is not the smartest thing to do. It is essential to allocate funds in such a way such that the risks are mitigated. Thissimply means that if you incur a loss on one investment, you have room for profit on another. Such investors, who are constantly looking to diversify their portfolios, must consider investing in NFO mutual funds. Let us find out more about NFOs, how to invest in them and the many benefits of investing in this unique investment instrument.
What is NFO?
A New Fund Offer or NFO refers to the first subscription offering that is made to interested parties for any new funds which are offered by investment companies. In theory, an NFO is akin to an IPO or an initial public offering,that it is launched to raise funds. The NFO typically ensues at the time when a new fund is being launched. It allows the launching company to raise capital for purchasing securities. Mutual funds are the most common types of NFOs which are marketed by investment companies.
How to invest in NFO?
There are two ways through which one can invest in NFO. Investing in NFO is an easy, hassle-free process and you can choose one of the below-mentioned methods for investing. Each investment method comes with its own set of perks. Let’s have a look at them
Investing in NFO through a broker
You can reach out to your broker who can help you invest in a new fund offer. Brokers typically serve as authorised mediators between a company and the public. Ensure that the broker you reach out is an authorised broker from a reputed investment company and someone you trust. Your broker can help you complete all the formalities regarding applying for the NFO and filling the necessary forms. He also provides details regarding all the necessary documents that must be submitted along with your application. The most important benefit of applying for NFO through a broker is that you get door-step services. Furthermore, you can consult your broker regarding the future performance of the fund you are investing in.
Investing in NFO through your online-trading account
This is certainly the most convenient way of making an NFO mutual fund investment. If you are already investing in shares and mutual funds, you should have an onlinetradingaccount. You can use your online-trading account to invest in NFOs as well. You can purchase and sell your NFO units online, conveniently, from the comfort of your home. You can also use your online-trading account to track the net asset value or NAV of your investments.
Benefits of investing in NFO
- An NFO can give you new opportunities to diversify your investment portfolio
- NFOs offer new and unique investment ideas or themes
- There is a fixed entry and exit time for close-ended funds, which often proves profitable
- Investors looking for liquidity can invest in open-ended NFOs, as you can purchase or sell your NFO units anytime.
- Most NFOs are launched during the bull of the market. NFO Investors are typically looking at investing during the bull market.
- NFOs are usually launched as limited period offers and can often prove to a very profitable investment
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