An NFO (New Fund Offer) is a first-subscription basis fund issued by asset management companies. Investors can subscribe to this scheme for a limited pre-defined period only. The cost of every unit of NFO is usually low as compared to other mutual funds options. The post-listing gains from NFO investments are generally better for investors. The objective of every company offering NFO funds is to accumulate an adequate amount of initial corpus needed to get the ball rolling!
Fund managers associated with these kinds of funds also get the chance to build their portfolios. All parties associated with these funds reap NFO benefits in numerous ways. Read on to get to know all these advantages of a New Fund Offer investment.
Major NFO Benefits To Look Out For
Every investor does his best to make maximum profits from his investments, whether it be a small amount acquisition or a large amount gamble! Here are a few NFO benefits investors can look up to for better returns:
Exposure To New Strategies
NFOs are the initial variant of every mutual fund that is released in the stock market. The strategies of these funds are new and better to potential investors looking for a change in their portfolios. From asset allocation and risks involved to liquidity and expected returns, everything becomes clear with the objectives mentioned with these funds.
Fund managers are free to hold investments of closed-end NFOs if the condition of the market is not favorable. This flexibility of when to invest and how much gives fund managers the required liberty to make analyzed decisions.
Support For Fund Lock-In
The lock-in period of an NFO investment varies between three and five years. This feature of NFO benefits beginners and budding investors who tend to have less patience. These investors are likely to end up impairing the returns from their investments. Therefore, if one looks at this fact differently, the lock-in period is profitable in the long run.
Less Risk of Large Flows
Every investor has to hold his money in NFO investments unless the pre-determined tenure is complete. So, fund managers do not have to bear the risks of managing large flows of investments. They can stay focused on the initially collected amount and plan its better allocation over the years!
Longer Period of Subscription
Most investors think NFO benefits and IPOs are the same! However, the IPOs mostly have a subscription period of a maximum of three days, while NFO openings last for 15-20 days. Investors get enough time to evaluate their options, go through the objectives, and make a choice!
Available In Both Types of Funds
NFOs are available in both open-end and closed-end fund types. Investors can stick to their choices as per their understanding of the market. So, for investors who are not willing to block their funds for a particular period, open-end options are also available. It is the responsibility of the investor to pick his side!
The Final Say
Investors should always evaluate their investment horizon before subscribing to NFO benefits. Since the lock-in period of these funds may vary from 3-5 years, it is essential to analyze the options. If an investor feels like withdrawing his investment before the completion of the tenure, he may have to bear the exit load (pre-exit fee). Also, these kinds of withdrawals do not put a good impression on the portfolio!
It is a prudent move for an investor to put money in NFOs that promise better strategies and prospects. Use a comprehensive online broker to look after the nitty-gritty of the process. Subscribe easily using a reliable platform without any long procedures or hassle!