Things that you must check before you invest in NFO

by Arjun Pal Student

Things that you must check before you invest in NFO

Before you decide to invest in them you must know what the NFOs (new fund offerings) entail. These NFOs are new funds that are being offered by the fund houses that offer mutual funds as well. They present investors a great chance to save some money on their investment. The investment over here functions just as it happens with a normal mutual fund. Investors put in money in the fund and then that is allotted to various assets such as bonds and stocks. This is done as per the objectives of the respective investors. However, it is important to check out a few things in this regard before you invest in them.

Go through the SID

When you are investing in an NFO you must read the SID (scheme information document) carefully. Find out the investment objective of the mutual fund. You must do this before you make any decision in this regard.

Check the track record

It is important to check how well the fund house has performed in the past. How well has the fund manager performed? These are all important factors in this particular context. You can be sure that if the fund manager has a history of performing well, they would manage the new scheme the best. This is why it also makes sense to opt for a top-class fund house such as ICICI Direct when you are investing in a new fund offering.

Find out the costs of investment

You must always decide on whether you would want to invest in the NFOs after you have looked at the costs that are associated with the programme. The thing with these newer funds is that they manage small corpora and their expense ratios are on the higher side too. It is always better to invest in NFOs where the expense ratios are lower so that you can get the maximum return in these cases.

What is the investment theme in this case?

Before you invest your money in an NFO scheme you should always check the investment theme of the same. Does the fund house offer you an investment proposition that you have never come across? In that case, you can think of investing in it for the long term.

So, finally, you need to decide if you want to invest in the NFOs or not. Financial advisors would always advise you to hedge your bets and invest in existing funds that have a proven track record of consistently strong performance.