New Fund Offer (NFO) is the very first time subscription offer for a specific ambitious mutual fund scheme that is to be made by any Asset Management Company (AMC). Like any other new issue in the stock market an NFO provides an opportunity for the investors to buy units of the mutual fund at a very low price, which is usually Rs 1 or ₹10. Hence, investing in an NFO mutual fund could be a great business decision for investors who want to diversify their investment portfolios or are seeking opportunities to invest in new products. Below is a list of the various advantages that are likely to be observed when investing in an NFO mutual fund.
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Opportunity to Enter at an Attractive Price
The NFOs are typically introduced at a low price per unit with an exit load of 1% if an investor redeems his investment within a year. While existing mutual fund schemes that have reached higher NAVs because of the gains recorded in the market present a challenge to would-be investors, NFOs offer an opportunity to enter the market at first glance. This makes it suitable for people with a limited amount of capital to invest in the market.
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Potential for Growth
Any NFO mutual fund targets those areas of the market that are thought to show growth potential. Buying sectoral funds such as electric vehicles or green energies at the beginning will help you because those industries will expand greatly. These new sectors of growth can be even more attractive to early movers, thus they have bigger returns.
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Flexibility in Investment Options
Technologically, NFOs present investors with new fund structures as they come with the possibilities of investing in international markets. Thus, it becomes easier for investors to fine-tune their investments more towards their objectives and their capacity to take risks. Furthermore, they can direct their investment towards specific markets whereby they want to get their share.
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Potential for Higher Returns
A potential with NFOs is that they typically invest in growth sectors or emerging markets over the long term, which can give better returns than normal funds. While there is more risk involved with these funds, if the individual does not need to access the money for several years, he may reap large returns. The opportunities are found rewarding for anyone willing to go for the long haul.
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Portfolio Diversification
NFOs assist in risk diversification by getting investors into fresh themes or segments unavailable in existing mutual funds. This diversification helps minimise the exposure to the traditional industries and the distribution of the risks across the different classes of assets. It also assists investors in diversifying their portfolios by providing a mixture of growth-related investments.
In conclusion, it is worthwhile to invest in NFO mutual funds for those who are on the lookout for fresh investment avenues, diversification and growth at a low cost. However, education and assessment of the objective, assets and risk of the fund is fundamental. Such tricks are very time-consuming and may require a lot of effort, but websites such as 5paisa provide investors with all the detailed information and tracking of investment so that the most out of the NFO investments can be attained.
