How to Invest in NFO: Meaning, Benefits, and Guide to NFO Investment
4 April, 2025
Synopsis
A New Fund Offer (NFO) is a mutual fund scheme used by a fund house to raise capital for the first time.
NFO allows investors to invest in the fund, typically at ₹10 per unit, within 10 – 30 days, depending on the fund type.
Close-ended funds raise capital by issuing previously determined shares, while open-ended funds allow investors to buy/sell at any time.
Its benefits, such as a low barrier to entry, professional management, and diversification, make it suitable for investors.
Imagine attending the grand opening of a new restaurant in your city. The excitement of being among the first to experience the menu, the vibe, and the fresh concept is unmatched. Now, think of NFOs (New Fund Offers) as the grand opening of a brand-new mutual fund. Just like the restaurant offers an exclusive chance to taste its dishes at launch, an NFO allows investors to get in on the ground floor of a new investment opportunity—typically at a low price of ₹10 per unit.
Much like a restaurant’s menu crafted by expert chefs, NFOs are professionally managed and come with unique strategies designed to cater to specific financial tastes. However, just as you may not know how the restaurant will fare in the long run, NFOs also come with their share of risks due to limited history and transparency.
Curious to explore how to invest in NFOs and make them part of your financial menu? Let’s understand what it is, why it attracts investors, and how you can do it easily.
What is the New Fund Offer?
A New Fund Offer (NFO) is a mutual fund scheme used by a fund house to raise capital for the first time. This allows investors to purchase a unit of fund initially at a low price, typically at ₹ 10, during a specified time interval ranging from 10 to 30 days.
You can consider investing in NFO to gain exposure to the new funds. Like other established mutual funds, NFOs have no history, presenting both opportunities and risks.
Types of New Fund Offers
Close-ended fund: Funds that raise capital by issuing a predetermined number of shares at their inception, and once this offering is closed, no new shares are created.
Open-ended fund: This type of fund allows investors to buy and sell units at any time based on their Net Asset Value (NAV). Unlike close-ended funds, it provides more liquidity and flexibility.
Advantages of Investing in NFO
Offer a newer investment strategy: This helps investors experience a new horizon when existing funds do not align with their financial aim.
Lower Entry Barriers: Starting at a nominal price (₹ 10 per unit), make it accessible for a broader range of investor
Professional Management: Managed by experienced professionals who invest after going through in-depth research.
Diversification: Helps you to diversify your investment by investing in newer opportunities.
How to invest in NFO through SmartWealth?
With many advantages, are you thinking of investing in NFO? You can use the HDFC Bank SmartWealth app to purchase it by following some simple steps –
Log in to the HDFC Bank SmartWealth app.
Click on the New Fund Offering (NFO) in the Discover tab.
You can see ‘Open Now’ and ‘Upcoming NFO’ options.
You can select a fund tailored to your need, under ‘Open Now’ options.
Click on ‘Buy’, enter the Lump sum amount and Add to the cart to purchase the fund.
Risk of investing in NFO
Lack of History: The lack of historical data on NFO makes it risky for investors to see how funds will behave during market volatility.
Limited diversification: Some NFOs consider niche markets, which gives less diversification benefits.
Liquidity Constraint: While an Open-ended fund is liquid, a closed-ended fund locks an investment for a certain period, making it less liquid.
Less Transparent: New Funds offer less information about their investment strategies, and holding makes it less transparent.
Investing in NFO is like planting a seed in the garden. Like a gardener, you select the right seed and care for cultivation and a flourishing landscape. As an investor, you should consider your risk appetite and investment aim when choosing the best NFO to nurture your financial future.
Your next investment opportunity is waiting! Download the HDFC Bank SmartWealth App today to explore NFOs and transform your financial future with just a few taps.
Disclaimer: This communication has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. HDFC Bank Limited ("HDFC Bank") does not warrant its completeness and accuracy. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument / units of Mutual Fund. Recipients of this information should rely on their own investigations and take their own professional advice. Neither HDFC Bank nor any of its employees shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. HDFC Bank and its affiliates, officers, directors, key managerial persons and employees, including persons involved in the preparation or issuance of this material may, from time to time, have investments / positions in Mutual Funds / schemes referred in the document. HDFC Bank may at any time solicit or provide commercial banking, credit or other services to the Mutual Funds / AMCs referred to herein.
Accordingly, information may be available to HDFC Bank, which is not reflected in this material, and HDFC Bank may have acted upon or used the information prior to, or immediately following its publication. HDFC Bank neither guarantees nor makes any representations or warranties, express or implied, with respect to the fairness, correctness, accuracy, adequacy, reasonableness, viability for any particular purpose or completeness of the information and views. Further, HDFC Bank disclaims all liability in relation to use of data or information used in this report which is sourced from third parties.
HDFC Bank is an AMFI-registered Mutual Fund Distributor & a Corporate Agent for Insurance products.
