NFOs: Here’s what you need to know before investing

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NFO is the first subscription offering for a fund by a mutual fund company. Investors are often in a state of dilemma whether to invest in NFO as it does not have any past performance.

Money9 Helpline hosted Hemant Rustagi, founder-director of Wiseinvest Pvt Ltd, to address doubts related to investments in NFOs

Edited Excerpts

Shivangi Singh, Delhi: Amidst the growing number of NFOs, how can a new investor identify a good NFO to invest in?

Rustagi: It is not simple to invest in mutual funds as there are so many options available today. As an investor when you invest in an NFO you have to check whether it is suitable for you. It might be suitable for a mutual fund, but you have to assess your own portfolio’s suitability. Even if it is suitable, see whether it is the best available option, or should you go for the existing fund. You have to see the asset allocation and space in your own portfolio. Before selecting an NFO, you should consider the size of the fund house, the performance of other funds from that AMC, and the fund manager’s track record.

Arun Singh: Should we take a risk with NFO from a large and stable AMC like ICICI Pru Flexi Cap which has historical NFO?

Rustagi: The fact is that whether a fund is launched by a large fund, mid or small-size fund the ultimate important thing is what the fund is, what is its underlying portfolio, will it fit in your asset allocation etc.