What Is a NFO (New Fund Offer) ?

Podcast Duration: 05:54

What is NFO?
Hi friends, and welcome to this podcast by Angel Broking!

Doston, investment ki duniya me no two days are the same - waise toh aap ye baat life ke baare mein bhi bol sakte ho, lekin there is a lot of new stuff that goes down and up in the stock market on an everyday basis - maybe that, not all of us can say about our lives, haina! In fact, kuch log toh apne daily routines se bore hokar excitement aur thrill seek karna apni life ka objective bana dete hain. Ab mere dost Kartik ka hi example le lo - woh roz koi na koi friend ko call karke hills ki ek trip plan karne ke liye convince karne mein 15 minutes spend karta hai. Wahin mera doosra dost Kenith market mein offer kiye jaa rahe sabhi mutual funds ke statistics ko dekhkar bore ho gaya hai - itna zyada, ki aap kisi mutual fund ka naam lo, aur woh 1, 3 aur 5 year returns se lekar exit load implications aur holdings tak ki information aapko fingers par count karwa dega. Woh naye mutual funds ki news hi track karta rehta hai.

Arre isi story se toh mujhe idea aaya tha aapko NFOs ke baare mein batane ka! Toh der kis baat ki, shuru karte hain jaanna ki NFO ka kya matlab hota hai, aur Kenith naye mutual funds se itna obsessed kyun hai.

Toh doston NFO basically expands to New Fund Offering. Iske acronym se aap kaafi cheezen samajh sakte ho. For example, New fund offering ka matlab hua ki market mein ek naya mutual fund offer kiya ja raha hai. Rings bells with anything else, anyone? Remember initial public offerings, jinse naye stocks ko market mein offer kiya jaata hai? Basically, NFO is similar to an IPO, except for the fact that NFO ke zariye basically asset management companies naye mutual funds ke antargat securities purchase karne ke liye funds ikattha karti hain.

Toh what's the benefit of NFOs for you, as an investor? Chaliye dekhte hain.

Jab koi Asset management company ek naya fund offer karti hai, toh wo iske units ko ek fixed price par market mein offer karti hai. Ye fixed price usually 10 rupay ki hoti hai - yani ki mutual fund ka ek unit aapko 10 rupay me offer kiya jaata hai. NFO ke issue ke saath sath you can also read a document which tells you what will happen with the money that gets pooled at the end of the NFO. Is document ko bolte hain offer document.

Doston NFO issues usually 30 din ke liye market mein open rehte hain. Achcha NFOs mein bhi do types hote hain - these are open ended NFOs and close ended NFOs. Inke beech ka diffrence ye hota hai, ki close ended NFOs mein aapke paise ek set period ke liye lock in ho jaate hain, and is period mein aap apne paise ko funds se withdraw nahi kar sakte. Technically, aap close ended funds ke units ko market mein bech toh sakte ho, lekin these are usually less liquid.

You might be wondering, ki mutual funds mein regular investment karne ki jagah NFOs ke zariye invest karne mein kya fayda? And that’s exactly what we are going to talk about, and a few ways in which you need to be careful as you invest in a new fund offering.

Benefit number 1 - NFOs ke zariye aap apne paise ko nayi aur innovative strategies ke through grow kar sakte ho. For example, there are some funds jo aapko pre-IPO companies mein systematically invest karne mein madad karte hain. And there are others dedicated to protecting your investments using put options. NFOs can therefore give you new exposure to your funds. Benefit number 2 - Agar aapne NFOs market ki peak par khareede the, toh aapka fund manager aapke funds ko hold karke lower levels par purchase kar sakta hai. No need to worry about entering the market at the top of the curve!

Benefit number 3 - Kuch logon ke liye lock-in period desirable nahi hota. Lekin statistics suggest ki jyadatar log equity market mein do saal tk ke liye invested rehte hain, and aren't able to realize the true potential of long term investments. Mutual funds mein aapko long term exposure ka option milta hai.

Ab doston, ye benefits aapke judgement aur aapke NFO ki issuing company aur uske fund manager par bhi depend karta hai. Toh dekhte hain some points to keep in mind before investing your money in an NFO:

Number 1 - Run a check on the AMC - yani ki, NFO issue karne wali company ki reputation aur existing offerings par dhyaan den.

Number 2 - NFO ke fund management par focus karen - are the people responsible for managing your and millions of other people’s money, actually responsible and qualified enough?

Number 3 - Read the offer document thoroughly - isme aapko investment strategy aur allocation ke regarding details dekhne ko milegi.

And lastly, Number 4 - NFOs ki koi performance history nahi hoti hai - aur na hi koi performance indicators. Thoroughly understand the risk and return potential before investing in them.

Toh doston, this podcast should have given you a good idea of what NFOs are, and how they can help you one-up your investment strategy. NFOs can be exciting, but don’t lose sight of the risks involved in the process of investing in the securities market. To understand what these are, check out our youtube channel, or visit www.angelbroking.com to learn more! Milte hain next podcast par.

Until then, goodbye from angel broking, and happy investing!