A NFO scheme (New Fund Offer) is an opportunity for investors to subscribe to a mutual fund when it is first launched. It allows investors to get in at the base price before the fund starts trading in the market. Mutual fund companies introduce NFOs to attract investors and build assets under management (AUM). Understanding how an NFO scheme works can help investors make informed financial decisions.

What is an NFO Scheme?

A New Fund Offer (NFO) is similar to an Initial Public Offering (IPO) in the stock market. It is the first-time subscription period of a mutual fund. Investors can buy units at the face value, which is usually set at Rs. 10 per unit. After the subscription period ends, the fund is launched and its Net Asset Value (NAV) fluctuates based on market conditions.

Types of NFO Schemes

There are two main types of NFOs:

1. Open-Ended Funds: These allow investors to enter and exit anytime after the launch.

2. Close-Ended Funds: Investors can invest only during the NFO period and can redeem after a fixed tenure.

Benefits of Investing in an NFO Scheme

• Lower Entry Price: Since the NFO starts at a fixed price, early investors can benefit if the fund performs well.

• Diversification: Many NFOs introduce unique investment strategies and asset allocations.

• Professional Management: Fund managers bring expertise in asset allocation and risk management.

Should You Invest in an NFO Scheme?

Before investing, consider factors like the fund’s objective, track record of the fund house, and expected market conditions. Conducting thorough research will help in making a sound investment decision.