Upcoming NFO

Like mutual funds, NFOs are of different types. Following is a mention of various types of NFO to invest in:

• Open-ended funds
An Open-ended fund is the most popular type of mutual fund to invest in. There is no restriction to the fund units you can buy or sell at any given time. Given this, the number of units held in your portfolio keeps changing. The new units you will buy will be purchased at Net Asset Value (NAV) which was determined before. This gives you a chance to maximize your returns in the long run.

• Close-ended funds
Close-ended funds are based on a fixed corpus. Once the fund subscription period is over, no addition can be made to your portfolio. The fund’s NAV is determined considering the total number of units with respect to the total value of their underlying assets.

• Exchange Traded Funds
Exchange Traded Fund is like a mutual fund which can be traded on the stock market like a normal stock. An AMC can come up with a New Fund Offering for ETFs as well. There are no restrictions on the buying and selling of fund units.

Careful consideration is necessary before making any investment. If it’s a market-linked investment observing caution and being prepared is absolutely necessary. The following are important considerations you must make before investing in an NFO:

• Cost: The mutual fund houses can levy a certain amount of exit loads on redemption of the mutual fund schemes before its tenure. It is necessary to check the overall cost before investing in an NFO as it can impact the returns. Moreover, the expense ratio of the fund should also be considered.
• Securities: Investors should check the types of stock market instruments that the mutual fund scheme will invest in. These details about the portfolios can be obtained from the offer documents.
• AMC reputation: You must know the reputation of AMC in the market and its historical performance. Check the performance and current positioning of AMC’s previous NFOs. As you are likely to invest a significant sum you also need to make sure that AMC is trustable and reputable.
• Personal finances: You must grasp your personal finance before making an investment. Chalk out an effective plan of action considering your investment goals and financial requirements. This will help you choose the right investment instrument.