“The good portfolio is more than just a long list of great stocks and bonds. It is balanced and provides the Investor with protections and opportunities with respect to a wide range of contingencies.”
– Harry Markowitz
Have you been experimenting with new financial products? Or have you been thinking about doing that? Well, whatever it may be – you are on the right track. This is exactly the time for the evolution of new financial products, and there has been a positive outlook from pro investors all the way to the newbies for exploration and experiments to try new products and diversify their portfolios.
Among these new instruments comes a new development – New Fund Offer or NFO. Well, by the name, you can deduce that an AMC would launch the fund for the very first time in the market. Let us talk more about NFOs here, and you will find out about some of the best ones in 2021.
What is an NFO?
A New Fund Offer is when the Asset Management Company introduces a brand new mutual fund plan or strategy. The AMC would announce a New Fund Offer (NFO) in order to raise some funds for securities purchases. Furthermore – mutual fund NFOs function just like an initial public offering (IPOs). The portfolio’s details – such as the firm shares to be bought, the type of assets to be bought, the fund manager, and much more, are also included in the new fund offer’s document.
Within a certain time frame – an investor would be able to subscribe to an NFO in the market. They could buy the units for the same price as it would be for membership. Normally – the promotional price is 10 Rupees. The Investor could also get the fund at a market price after the promotional period is over. The Net Asset Value is the market price that the mutual funds are traded at. The New fund offering is used to launch both open-ended and closed-ended funds.
How Exactly Do these NFOs Work?
An NFO can usually stay active on the market for a minimum of 30 days. The revenue that is raised is used to purchase securities in a variety of publicly-traded stocks that are listed on the stock exchange.
Any mutual fund trades on the basis of its Net Asset Value NAV once the new fund offer period ends (closing date). Subscribing to a mutual fund during a new fund offer is also a viable alternative. The units are provided to the investors at a low rate. As a result, investors can anticipate making more money after the stock is listed.
Additionally, Fixed Maturity Plans FMP is the most popular NFO for debt funds, generally known as fixed-income funds. They’re called fixed maturity plans or FMPs, and they work similarly to fixed return plans. In addition, the assets’ tenure corresponds to the fund’s. As a result, interest rate risk is eliminated.
Here are the Iconic NFOs of 2021
Well, given this is how an NFO operates – do you feel like it’s a perfect investment for you? If your answer was yes, go ahead then find out; what are the best NFOs you could have invested in for 2021:
- Axis Bluechip Fund
- Parag Parikh Long Term Equity Fund
- UTI Flexi Cap Fund
- Axis Midcap Fund
- SBI Equity Hybrid Fund
- Mirae Asset Hybrid Equity Fund
- Kotak Emerging Equity Fund
- Axis Small Cap Fund
- SBI Small Cap Fund
- Mirae Asset Large Cap Fund
Well, if you are among the investors who do not know if NFOs are your type of investment – you might want to find out. We can get you out of that confusion – here is a part when you want to know if the investment instrument is for you.
Who are NFOs Most Suitable for?
When the market gets to newer highs, – most investors go looking for investment opportunities. The investors want to get into the market – whether it’s gold, the stock market, or real estate, as they believe it will continue to get higher. The investor is also eager to put his money into anything that appears to be a good and profitable possibility. As a result – people would select the investments that are less costly.
AMCs do strive to take advantage of this investor mentality in the majority of circumstances. They offer a discount on the NFO in order to attract new investors – which usually works. As a result – the investors perceive that it is a great opportunity to buy funds. NFOs are also looked at as good value for money by the investors that subscribe to them. In addition – a mutual fund house can meet its goal of increasing its assets under management.
Investing in NFOs also gives portfolio managers and investors more flexibility. When markets are at their height – especially for the closed-end funds, then the fund manager could hold a part of the investor’s fund to invest it later.
However – here, because it is investors’ hard-earned money, a comprehensive investigation is required before going with their investment funds.
Now that you know all of this about NFOs – it comes to the part where you decide if the investment would suit you. Make informed decisions when it comes to putting your hard-earned money into an investment basket. These NFOs from last year can give a brief idea of how NFOs work, and what you would be taking away from them when you invest in one.