What Is An NFO And How To Analyse NFO Schemes?

The term NFO in mutual fund language stands for New Fund Offer which means there is a new scheme being rolled out by an Asset Management Company (AMC) to attract investors. A new fund offer is a mutual fund scheme created by the company that enables people or to be specific, investors to put their money into the fund that in turn gets allocated across shares of different companies. The benefits of investing in a mutual fund scheme are many and low risks due to a diversified portfolio, invested money being managed by experts called fund managers are a few that are noteworthy. However, when an NFO by a mutual fund company is issued, investors have to be wary of certain factors before investing their money no matter how attractive the offer looks. It can be fair enough to say that being watchful is one of the few factors that can safeguard your money as throwing caution to the wind cannot be an example to be followed while investing in mutual funds and even the stock market in general. A New Fund Offer can be done by a mutual fund company for quite a number of reasons and let us see them in detail down below about how to analyse NFO schemes before investing your valuable money.

Company Profile

The saying “reputation precedes everything else” holds true for many aspects of life in general but being specific about businesses, especially when it comes to your hard-earned money being put into an NFO by a mutual fund company, it definitely holds true. Keeping an eye on the track record of the company that is coming up with the NFO mutual fund can be very helpful for you to visualize a true picture of how well the company has performed in terms of its returns. While considering a company’s profile as a part of your mutual fund analysis to decide whether or not to invest in it, there are certain factors that can work as helpful pointers.

• Have a thorough check of the company’s legacy. You might think there can be very little connection between the NFO mutual fund being brought out and the company’s history or one might even think is it even necessary to check the past track record of the organization. And yes, it does really matter to check and know about how well the organization has performed in terms of offering quality products or services and also their profitability over the years. Furthermore, tracking an Asset Management Company’s track record will not just help you understand its performance and profitability factors but also its business model.

• Check out the number of products that the company is already offering before rolling out this New Fund Offer. Even if this is not a defining factor, higher the number of options available, better the company’s standard. More significantly, the number of schemes offered by any particular AMC in a way can help us know its reachability factor among the target audience.

• Next up, be specific enough in your search and use the power of the internet. Ever since technology started booming, there has been an enormous surge in the provision and usage of online tools. Use some online tools to check which is the best AMC operating and then decide which plan you should invest your money in. This might sound like a generic factor but will help you decide whether the New Fund Offer from a particular AMC can be tried or should you stay away from it.

Allocation Of The NFO Mutual Fund

The next factor to be checked before deciding whether or not to invest in NFO schemes is to analyse what the planned allocation is. This should be of higher precedence as a part of mutual fund analysis. The reason behind checking out the allocation of the NFO mutual fund is that it gives you a good picture of how and where your invested money will be split or distributed. In simple words, the allocation of a new fund offer can be compared to that of a mutual fund scheme’s portfolio. A portfolio of a mutual fund scheme will describe the names of the companies on whose shares the invested money has been allocated and also how much has been done which is depicted in terms of percentage. Similarly, in an NFO mutual fund, the planned allocation will reveal the instruments on which the invested money will be split, enabling the investor to understand the risk factor involved, the percentage of returns, etc.

Read The Objective Of The NFO Mutual Fund

They say that every phase in life needs a proper plan in place and for a proper plan to be made, you need to have an objective well-defined. The reason why an objective proves to be highly significant is that it will help you execute your plan the way it is supposed to be without any deviation and hindrances. Similarly, it is very important for a person to read through the objective of the NFO mutual fund before investing in it. The objective of the New Fund Offer will help you completely understand what the new scheme is all about. The investment objective will let you know about a lot of factors that contribute towards the scheme’s purpose such as the rate of volatility, presence or absence of entry and exit loads, instruments of investments, and so on. But the significant reason why reading the objective of the fund should be a part of your mutual fund analysis is that it also lets you understand who can be the likely investors. It describes whom the New Fund Offer suits best such as corporates or retail individuals and other categories.

Check Out The Fund Managing Team

The next step in a mutual fund analysis should be checking out the fund managing team which is also quite a significant factor in order to determine how well might the NFO mutual fund will or can perform. Read in detail about the company’s board members and more importantly, the fund managing team such as the fund manager, sales head, and so on as their experience is what will lead your investment on the right track. Going through their track record of how many funds have they managed will help you understand their true capability of heading your investment. Also, check out how many other funds or schemes a fund managing team belonging to a particular Asset Management Company is handling and track the performance of those funds too. This way, you can arrive at a picture backed up by statistical figures which will help you understand whether the NFO mutual fund can head in the right direction under the respective team.

Investing in mutual funds has indeed become a rage in the recent past and that is also one among many other reasons that have resulted in the rise of many Asset Management Companies. Furthermore, these new companies keep coming up with NFO mutual funds quite regularly which has made it tough for investors in general about what to choose to invest their valuable money. But what will help any person be it seasoned investors or the beginner category is the properly acquired knowledge through detailed research and analysis about such new fund offers. And on a broader perspective, the above-mentioned information can be truly helpful for investors to understand the risks and advantages involved in such new schemes as they do their mutual fund analysis.