What is difference between a NFO and Mutual fund and IPO ?
A new fund offer (NFO) is the first subscription offering for any new fund offered by an investment company. A new fund offer occurs when a fund is launched, allowing the firm to raise capital for purchasing securities.
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.
As you can see, NFO and IPO both serve same purpose of raising capital, whenever a new Mutual Fund is launched it raises capital via NFO (New Fund Offer) while whenever a company wants to raise a capital it does so via IPO (Initial Public Offer).
Any advantage of applying in NFO?
Do we get some discount or something like listing gain? Currently axis global fund NFO is open… what the diff. Apply for NFO or buying from secondary marker after listing ?
The investment made in NFO can expose you to benefits like liquidity, diversifying your portfolio by investing in new strategies, unique investment objectives, etc. To point a few out
Once the NFO window of open-ended mutual fund scheme closes, any purchase of units can be made at the NAV (net asset value) of that particular scheme. Here new fund offering can help investors purchase units at comparatively nominal cost before the NAV of the fund is determined.
NFOs offer new and unique investment ideas or themes depending on the fund categorization, you can read the SID to know more about the NFO for a particular scheme. You can visit this page and click on the fund name to access the SID of a scheme.
NFOs are usually offered at an attractive price of Rs 10 per unit. It is an opportunity to execute a strategy at an affordable price.
The USP of an NFO lies in the innovative strategies that the fund house wants to explore, it can expose you to a new asset class/ index which you may not find in the existing open-ended funds.
The difference when you buy a scheme after once it is open for continuous transactions is that it will be allotted to you as per the NAV that would be released, this NAV can be higher than the NFO period NAV as well as lower depending on the funds performance.