New Fund Offering (NFO) is launched by an Asset Management Company (AMC) when it introduces a new mutual fund scheme for investors. Through an NFO, the AMC collects money from investors during the subscription period to create the initial corpus of the fund.

The working of an NFO is similar to an Initial Public Offering (IPO) in the primary market, where funds are raised to invest in securities as per the scheme’s stated investment objective and strategy.

Like mutual funds, NFOs are available in different types. Some of the common types of NFOs include:

• Open-ended funds: These funds allow investors to buy and sell units at any time. The number of units keeps changing, and investments are made at the applicable Net Asset Value (NAV).
• Close-ended funds: These funds have a fixed maturity period. Once the NFO subscription period ends, no fresh investments are allowed, and the NAV is calculated based on the total assets and outstanding units.
• Exchange Traded Funds (ETFs): ETFs can be traded on stock exchanges like shares. AMCs may launch ETFs through NFOs, and there are generally no restrictions on buying or selling units during market hours.

Careful evaluation is important before investing in an NFO, as these are market-linked investments. Some key considerations include:

• Cost: Check exit loads, expense ratio, and overall costs, as they can impact returns.
• Securities: Review the types of instruments the fund plans to invest in by referring to the offer documents.
• AMC reputation: Assess the AMC’s track record, credibility, and performance of its previous schemes and NFOs.
• Personal finances: Ensure the investment aligns with your financial goals, risk appetite, and investment horizon.