NFO
After the fall in the share market, the number of new schemes of mutual funds has increased rapidly. One after the other, mutual fund houses are coming up with New Fund Offers (NFO). Investors are being lured by the lure of cheap unit allotment in the new mutual fund scheme and are being shown the dream of big earnings. Let us tell you that in NFO, mutual fund companies sell units of the new mutual fund scheme to investors for the first time. There is a timeframe for NFO. That means investment can be made in it only within a fixed time limit. NFO is exactly like IPO. Investors feel that there is an opportunity to buy more units for less money. But financial experts say that it is not right to invest money in any NFO without thinking. Some information must be gathered before investing. Let us know what things should be kept in mind before investing.
First find out the valuation of the fund
Experts say that investors must know the valuation of that fund before investing in any NFO. After this, look at the structure of that fund to see where your money will be invested. Are you willing to take more risk if invested in high beta stocks? It is better to choose the fund according to your risk appetite.
What is the theme of the fund?
Must see the theme of NFO. In which sector will your money be invested? Better returns are expected in auto, infrastructure or renewable energy. If the fund’s money is being invested in these sectors then you can invest.
New index funds better option
Investors should invest in NFOs that create new indices. Funds that capture specific market segments can be attractive investments. At the same time, funds investing in commodities or investing in arbitrage trades should be avoided.
Be sure to look at the expense ratio
Before investing in any new fund, definitely check its expense ratios. A fund with low expense ratio is beneficial. In this you get higher returns on investment.
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