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An NFO is essentially a fundraising opportunity for AMCs to invest in various securities, such as shares and government bonds, on behalf of the public. These schemes are typically open for a specific time frame and are then listed on stock exchanges for trading. It is important to carefully consider the investment objectives, risk factors, and financial health of the AMC before participating in an NFO.
Investors can also opt for a Systematic Investment Plan (SIP) to invest in an NFO. This allows for regular investments at fixed intervals, providing the benefit of rupee cost averaging. Additionally, it is crucial to understand the expense ratio, which is the annual fee charged by the AMC for managing the fund, before investing in an NFO.
One must also be aware of the lock-in period, which is the duration for which the investment cannot be redeemed.