Gud Story
  • Home
  • Business
    • All
    • Automotive
    • Crypto
    • Education
    • Entrepreneurs
    • Finance
    • Healthcare
    • Industries
    • Insurance
    • Investment
    • Legal
    • Retail
    • Share Market
    • Startup
    Bitcoin Online Gambling

    Bitcoin Online Gambling – In Depth Knowledge

    How MetaMask Works

    How MetaMask Works? What are Its Pros and Cons?

    FICO Rating

    Obstacles of A Horrendous FICO Rating and The Plan

    Drive Between Oil Changes

    How Many Miles Can You Drive Between Oil Changes?

    Apply for Payday Loans with No Credit Check

    Get Cash in 1 Hour | Apply for Payday Loans with No Credit Check

    Direct Deposit Loans

    Best Direct Deposit Loans Available in Minutes

    Trending Tags

    • Decor
      • All
      • Design Ideas
      • Events
      • Furniture
      • Gardening
      • Home Repair
      • Housekeeping
      • HVAC Control System
      • Kitchen
      • Painting
      • Pest Control
      Caravan Mat

      Caravan Mat Buying Guide

      Benefits of Ducted AC Conditioning

      7 Benefits of Ducted AC Conditioning

      Enhance a Waterfront Home

      6 Easy Ways To Enhance a Waterfront Home

      Buying Air Filters Online

      How To Purchase The Right Air Filters Online in 2023

      Bathroom Flooring Designs

      Top 5 Eye Catching Bathroom Flooring Designs for 2023

      Installing Downlights

      10 Tips for Installing Downlights 

      Trending Tags

      • Lifestyle
        • All
        • Beauty
        • Culture
        • Drink
        • Fashion
        • Food
        • Hair Care
        • Health
        • Jewellery
        • Make up
        • Parenting
        • Shopping
        • Skin Care
        • Travel
        Bolton Strid

        Bolton Strid – Know About The River That Traps and Kills

        Artisan Chocolate

        Artisan Chocolate Has Several Health Advantages

        Therapy for Anxiety and Mental Health

        Why is Therapy Good for Anxiety and Mental Health?

        Hiring A Photographer

        What are The Advantages of Hiring A Photographer?

        Select A Coffin

        How Do You Select A Coffin?

        Black and Mild Cigars

        A Mild Introduction to Black and Mild Cigars

        Trending Tags

        • Sports
          • All
          • Basketball
          • College Football
          • Cricket
          • Formula 1
          • MLB
          • NBA
          • NCAA
          • NFL
          • NHL
          • WWE
          Accurate Predictions on Sports Games

          Two Best Ways to Get Accurate Predictions on Sports Games

          Becoming A Player

          Rules You Need to Know Before Becoming A Player

          Improve Yourself As A Cricket Player

          5 Tips To Improve Yourself As A Cricket Player!

          Increase Shooting Percentage

          Increase Shooting Percentage with These Tips

          Best Players in The IPL History

          Top 5 Best Players in The IPL History So Far

          Cricket World Cup 2023

          Information About Cricket World Cup 2023

          Trending Tags

          • Gaming
            • All
            • Apex Legends
            • Call of Duty
            • Esports
            • FIFA
            • Fortnite
            • Genshin Impact
            • GTA
            • Guides & Tips
            • League of Legends
            • Overwatch
            • Pokemon
            • Valorant
            Best Open World Games

            Best Open World Games Like Skyrim to Play in 2023

            Pokemon Characters

            Pokemon are Being Turned into Ghibli Characters by AI and Fans are Furious

            Best Soulslike Games

            A List of The 2023’s Best Soulslike Games

            'Snaking' in Call of Duty

            What is ‘Snaking’ in Call of Duty? Is It Against The Rules?

            Starcraft 3

            Is Starcraft 3 in the Works? The Popular Real-Time Strategy Series

            Dead Space (2023) Review

            Dead Space (2023) Review: Adapt to The Changing Times

            Trending Tags

            • Tech
              • All
              • Apps
              • Blockchain
              • Digital Marketing
              • Gadgets
              • How To
              • Mobile
              • NFT
              • PC & Mobile
              • Science
              • Solar Energy
              • Work Life
              Discord Voice Chat on Playstation 5

              A Guide on How to Use Discord Voice Chat on Playstation 5 for Beta Users

              On-Demand App

              Why You Should Create an On-Demand App: Key Insights

              Local SEO for Small Companies

              Advantages of Local SEO for Small Companies

              Temp Mail Generator

              Best 5 Ways to Use Temp Mail Generator for Online Purposes

              YouTube MP3 Downloader

              Choose The Best App for YouTube MP3 Downloader

              Magento Shop to WooCommerce

              How to Migrate Your Magento Shop to WooCommerce

              Trending Tags

              • Entertainment
                • All
                • Anime
                • Biography
                • History
                • Quotes
                • TV & Movies
                Tokyo Revengers Season 2

                Tokyo Revengers Season 2 Release Date: The Official Announcement Is Here

                Meredith Scudder

                Scottie Scheffler’s Wife, Meredith Scudder: Wiki, Bio, Family & More

                Pop Smoke

                Pop Smoke: Wiki, Bio, Family, Career, Love Life, Net Worth & More

                Astrid Loch

                BiP’s Astrid Loch & Kevin Wendt Expecting 2nd Baby

                Sex/Life

                Sex/Life Season 2 Unveils Steamy Teaser And Confirms Release Date

                Ne-Yo

                Ne-Yo Finalizes His Divorce From Ex-Wife Crystal Renay And Has To Pay Nearly $2 Million

                Trending Tags

                No Result
                View All Result
                Gud Story
                • Home
                • Business
                  • All
                  • Automotive
                  • Crypto
                  • Education
                  • Entrepreneurs
                  • Finance
                  • Healthcare
                  • Industries
                  • Insurance
                  • Investment
                  • Legal
                  • Retail
                  • Share Market
                  • Startup
                  Bitcoin Online Gambling

                  Bitcoin Online Gambling – In Depth Knowledge

                  How MetaMask Works

                  How MetaMask Works? What are Its Pros and Cons?

                  FICO Rating

                  Obstacles of A Horrendous FICO Rating and The Plan

                  Drive Between Oil Changes

                  How Many Miles Can You Drive Between Oil Changes?

                  Apply for Payday Loans with No Credit Check

                  Get Cash in 1 Hour | Apply for Payday Loans with No Credit Check

                  Direct Deposit Loans

                  Best Direct Deposit Loans Available in Minutes

                  Trending Tags

                  • Decor
                    • All
                    • Design Ideas
                    • Events
                    • Furniture
                    • Gardening
                    • Home Repair
                    • Housekeeping
                    • HVAC Control System
                    • Kitchen
                    • Painting
                    • Pest Control
                    Caravan Mat

                    Caravan Mat Buying Guide

                    Benefits of Ducted AC Conditioning

                    7 Benefits of Ducted AC Conditioning

                    Enhance a Waterfront Home

                    6 Easy Ways To Enhance a Waterfront Home

                    Buying Air Filters Online

                    How To Purchase The Right Air Filters Online in 2023

                    Bathroom Flooring Designs

                    Top 5 Eye Catching Bathroom Flooring Designs for 2023

                    Installing Downlights

                    10 Tips for Installing Downlights 

                    Trending Tags

                    • Lifestyle
                      • All
                      • Beauty
                      • Culture
                      • Drink
                      • Fashion
                      • Food
                      • Hair Care
                      • Health
                      • Jewellery
                      • Make up
                      • Parenting
                      • Shopping
                      • Skin Care
                      • Travel
                      Bolton Strid

                      Bolton Strid – Know About The River That Traps and Kills

                      Artisan Chocolate

                      Artisan Chocolate Has Several Health Advantages

                      Therapy for Anxiety and Mental Health

                      Why is Therapy Good for Anxiety and Mental Health?

                      Hiring A Photographer

                      What are The Advantages of Hiring A Photographer?

                      Select A Coffin

                      How Do You Select A Coffin?

                      Black and Mild Cigars

                      A Mild Introduction to Black and Mild Cigars

                      Trending Tags

                      • Sports
                        • All
                        • Basketball
                        • College Football
                        • Cricket
                        • Formula 1
                        • MLB
                        • NBA
                        • NCAA
                        • NFL
                        • NHL
                        • WWE
                        Accurate Predictions on Sports Games

                        Two Best Ways to Get Accurate Predictions on Sports Games

                        Becoming A Player

                        Rules You Need to Know Before Becoming A Player

                        Improve Yourself As A Cricket Player

                        5 Tips To Improve Yourself As A Cricket Player!

                        Increase Shooting Percentage

                        Increase Shooting Percentage with These Tips

                        Best Players in The IPL History

                        Top 5 Best Players in The IPL History So Far

                        Cricket World Cup 2023

                        Information About Cricket World Cup 2023

                        Trending Tags

                        • Gaming
                          • All
                          • Apex Legends
                          • Call of Duty
                          • Esports
                          • FIFA
                          • Fortnite
                          • Genshin Impact
                          • GTA
                          • Guides & Tips
                          • League of Legends
                          • Overwatch
                          • Pokemon
                          • Valorant
                          Best Open World Games

                          Best Open World Games Like Skyrim to Play in 2023

                          Pokemon Characters

                          Pokemon are Being Turned into Ghibli Characters by AI and Fans are Furious

                          Best Soulslike Games

                          A List of The 2023’s Best Soulslike Games

                          'Snaking' in Call of Duty

                          What is ‘Snaking’ in Call of Duty? Is It Against The Rules?

                          Starcraft 3

                          Is Starcraft 3 in the Works? The Popular Real-Time Strategy Series

                          Dead Space (2023) Review

                          Dead Space (2023) Review: Adapt to The Changing Times

                          Trending Tags

                          • Tech
                            • All
                            • Apps
                            • Blockchain
                            • Digital Marketing
                            • Gadgets
                            • How To
                            • Mobile
                            • NFT
                            • PC & Mobile
                            • Science
                            • Solar Energy
                            • Work Life
                            Discord Voice Chat on Playstation 5

                            A Guide on How to Use Discord Voice Chat on Playstation 5 for Beta Users

                            On-Demand App

                            Why You Should Create an On-Demand App: Key Insights

                            Local SEO for Small Companies

                            Advantages of Local SEO for Small Companies

                            Temp Mail Generator

                            Best 5 Ways to Use Temp Mail Generator for Online Purposes

                            YouTube MP3 Downloader

                            Choose The Best App for YouTube MP3 Downloader

                            Magento Shop to WooCommerce

                            How to Migrate Your Magento Shop to WooCommerce

                            Trending Tags

                            • Entertainment
                              • All
                              • Anime
                              • Biography
                              • History
                              • Quotes
                              • TV & Movies
                              Tokyo Revengers Season 2

                              Tokyo Revengers Season 2 Release Date: The Official Announcement Is Here

                              Meredith Scudder

                              Scottie Scheffler’s Wife, Meredith Scudder: Wiki, Bio, Family & More

                              Pop Smoke

                              Pop Smoke: Wiki, Bio, Family, Career, Love Life, Net Worth & More

                              Astrid Loch

                              BiP’s Astrid Loch & Kevin Wendt Expecting 2nd Baby

                              Sex/Life

                              Sex/Life Season 2 Unveils Steamy Teaser And Confirms Release Date

                              Ne-Yo

                              Ne-Yo Finalizes His Divorce From Ex-Wife Crystal Renay And Has To Pay Nearly $2 Million

                              Trending Tags

                              No Result
                              View All Result
                              Gud Story
                              No Result
                              View All Result
                              Home Business Investment

                              All You Need To Know About New Fund Offering (NFO): Benefits And Risks

                              Tanupriya Sarkar by Tanupriya Sarkar
                              April 6, 2022
                              in Investment
                              Reading Time: 5 mins read
                              0
                              New Fund Offering (NFO)
                              Share on FacebookShare on Twitter

                              During a stock market bull run, you will come across many companies launching their initial public offering (IPO) and fund houses launching their new fund offering (NFO). Both of them have their pros and cons. This blog focuses on all you need to know about new fund offerings (NFOs): NFO meaning, Benefits, and risks. Before we look at the NFO benefits and risks of investing in an NFO, let us first understand NFO meaning.

                              Table of Contents

                              • NFO meaning and its benefits
                              • Risks of investing in an NFO
                                • 1. Most NFOs are usually launched during bull markets
                                • 2. The NFO doesn’t have any proven track record
                                • 3. The expense ratio is usually high during the NFO
                                • 4. An NFO can’t give capital appreciation like an IPO

                              NFO meaning and its benefits

                              When a mutual fund house launches a new mutual fund scheme, they invite the general public to invest in it through the new fund offering (NFO) process. The fund house announces the NFO dates during which the investors can submit their investment applications. The fund house releases documents specifying details about the mutual fund scheme like scheme objectives, investment philosophy, the risks involved, the fund manager/s, their experience and schemes handled by them earlier, etc. This is the basic NFO meaning.

                              Risks of investing in an NFO

                              Risks of investing in an NFO

                              An individual can invest in a new mutual fund scheme at the time of the NFO or any time later (in the case of open-ended mutual fund schemes). Before you take a call on whether you should invest at the time of the NFO, consider the following risks.

                              1. Most NFOs are usually launched during bull markets

                              During a bull market, there is a lot of euphoria among investors. Most companies and analysts tracking them come out with rosy projections about the future. Due to this, most investors are willing to invest in these companies, wherein the rosy projections may or may not materialize in the future. To cash in on the positive investor sentiment, many companies come out with their initial public offering (IPO), and fund houses come out with their new fund offering (NFO).

                              During the downturn that follows the bull market, the share prices of companies that had gone up based on the rosy projections see a big fall. During this time, the net asset values (NAVs) of mutual fund schemes that came out with NFOs during the bull run and invested in these companies saw a big fall. Investors are left with capital losses on their investments. Hence, you should be cautious about investing in NFOs, specifically those that come out during bull markets, to cash in on the euphoria.

                              ADVERTISEMENT

                              2. The NFO doesn’t have any proven track record

                              When a fund house comes out with an NFO, there is no past proven track record of the mutual fund scheme. An investor has no way of assessing whether the investment philosophy that will be followed by the fund manager of the new scheme will work or not. You can only judge the fund manager based on the other existing schemes they are managing. But, the investment objectives and philosophy of the existing schemes may be totally different from the new scheme being launched.

                              You should be cautious about the NFO meaning & schemes related to new or emerging themes like blockchain, digitization, ESG, renewable energy, electric vehicles, climate change, etc. There is not enough past data available to see the financial performance of the companies operating in these themes. Besides, technology related to these themes is changing fast. So, we don’t know whether these technologies will survive or something else will replace them.

                              Hence, you should be cautious about NFOs that will be investing in these themes. You should wait till the theme plays out to some extent and there is enough evidence that it will sustain and grow in the future. You can assess this by skipping the NFO and investing later.

                              3. The expense ratio is usually high during the NFO

                              SEBI has a tiered structure for mutual fund schemes to charge the expense ratio. As per SEBI guidelines, a mutual fund scheme has to reduce its expense ratio as per the specified band as its assets under management grow. So, the higher the AUM, the lower the expense ratio band.

                              During the NFO period, the scheme doesn’t have any AUM; hence the expense ratio will be on the higher side. A higher expense ratio will directly eat into your returns. Hence, you may skip the NFO when the expense ratio is high. After the NFO, once the scheme acquires a decent AUM, it will have to reduce the expense ratio as per SEBI guidelines. You can then invest with a low expense ratio. By then, you will also have enough past performance data to analyze the NFO meaning & performance and evaluate whether it is worthy of investment.

                              4. An NFO can’t give capital appreciation like an IPO

                              We see many IPOs listing at a significant premium to the issue price during a bull market. During the period 2020-22, we saw many IPOs listing at a 50-100% premium to the issue price. Many people compare a mutual fund NFO to a company IPO. They invest in a mutual fund NFO, hoping that they will get capital appreciation similar to a company IPO.

                              Investors need to understand that mutual fund scheme units are usually issued at a NAV of Rs. 10 per unit. There are no listing gains once the NFO ends and the purchase and redemption of units starts. The NAV of the unit depends on the value of the underlying securities of the scheme divided by the number of units. The movement of the NAV of the scheme units is slow and steady on either side, whether up or down. The gains of the unitholders will depend on the number of units held and the NAV of each unit. Hence, investors shouldn’t invest in mutual fund NFOs hoping to make listing gains on the lines of IPOs.

                              Now that we understand the NFO meaning and the risks involved in investing in it, you can take a call on whether you want to invest at the time of NFO or wait for some time, observe the performance and then take an investment call. Understanding the NFO meaning is of utmost importance, as NFO can turn out to be a risky investment if not invested properly.

                              Also read: Things To Do When Planning Your Retirement

                              Related Posts

                              individual retirement account (IRA)

                              Some Facts About Bullion and Precious Metals IRAs

                              January 28, 2023
                              Emergency Fund Money

                              How Much Money Does Your Emergency Fund Need?

                              January 25, 2023
                              How Much Should I Invest in Dividend Funds

                              How Much Should I Invest in Dividend Funds? Is Dividend on MF Taxable?

                              January 24, 2023
                              How The Brokerage Calculated

                              How The Brokerage Calculated in The Share Market

                              December 21, 2022
                              ADVERTISEMENT
                              Gud Story

                              Gudstory is the ultimate guide that will keep you updated about almost everything and anything. We aim to provide our readers with an informative detail about the viral stories that have been occurring around us. Here at Gudstory, we focus on delivering our readers with the latest information about everything.

                              The stories that we cover specialize in a wide niche which includes News, Lifestyle, Fashion, Entertainment, Technology, and Women. The purpose of the blogs and articles is to keep you updated using vivid formats and interesting styles so that significant information stays in your mind.

                              Business World

                              • Business
                              • Automotive
                              • Crypto
                              • Education
                              • Entrepreneurs
                              • Finance
                              • Insurance
                              • Investment
                              • Share Market
                              • Healthcare
                              • Industries
                              • Legal

                              Decor

                              • Home Improvement
                              • Design Ideas
                              • Events
                              • Furniture
                              • Gardening
                              • Home Repair
                              • Housekeeping
                              • HVAC
                              • Kitchen
                              • Painting
                              • Pest Control

                              Real Estate

                              • Real Estate
                              • Moving
                              • Construction
                              • Property Loan
                              • Selling a Home
                              • Buying a Home
                              • Commercial Real Estate

                              Company

                              • Advertise
                              • About Us
                              • Contact Us
                              • Home
                              • About
                              • Advertise
                              • Contact
                              • Privacy Policy

                              © 2018-22 Gud Story

                              No Result
                              View All Result
                              • News
                              • Business
                                • Automotive
                                • Education
                                • Finance
                                • Healthcare
                                • Investment
                                • Legal
                                • Real Estate
                                • Startup
                                • Entrepreneurs
                                • Industries
                                • Retail
                              • Decor
                                • Design Ideas
                                • Home Repair
                                • Furniture
                                • Gardening
                                • Kitchen
                                • Housekeeping
                                • HVAC Control System
                                • Events
                              • Lifestyle
                                • Health
                                • Food
                                • Drink
                                • Travel
                                • Beauty
                                • Make up
                                • Hair Care
                                • Skin Care
                                • Fashion
                                • Jewellery
                                • Shopping
                              • Sports
                                • NBA
                                • NFL
                                • College Football
                                • MLB
                                • NHL
                              • Gaming
                                • Esports
                                • Apex Legends
                                • Battlefield
                                • GTA
                                • Call of Duty
                                • Fortnite
                                • Cosplay
                                • CS:GO
                                • FIFA
                                • Genshin Impact
                                • Guides & Tips
                              • Tech
                                • Work Life
                                • Science
                                • Apps
                                • Mobile
                                • Gadgets
                                • Digital Marketing
                                • How To
                                • PC & Mobile
                                • Blockchain
                                • NFT
                              • Entertainment
                                • Biography
                                • TV & Movies
                                • Anime
                                • Quotes
                                • History
                              • Relationship
                              • Women
                              • Animals
                              • Luxury
                                • Billionaires
                                • Leaders
                                • Cars & Bikes
                                • Jets
                                • NCAA
                                • UFC
                                • Culture
                                • Homes
                                • Hotels
                                • Interiors
                                • Formula 1

                              © 2018-22 Gud Story