What is NFO in Mutual Funds What is NFO in Mutual Funds

What is NFO in Mutual Funds?

If you invest in mutual funds or are planning to invest in mutual funds, you need to know about New Fund Offering (NFO).

For stocks, you can go for an Initial Public Offering (IPO) and in the same manner, for mutual funds, there is NFO.

NFO allows you to invest in a mutual fund scheme during the time of its launch. In this article, we will cover in detail about NFO in mutual funds.

What is NFO in Mutual Funds?

NFO in mutual funds stands for a new fund offer. It is the inception of a new mutual fund scheme.

When the Asset Management Company or fund house brings a new mutual fund scheme into the market, it invites the general public to subscribe to the units of its scheme through NFO.

Details of the scheme, kind of securities to be procured, fund manager, etc. are mentioned in NFO.

Generally, investors can buy mutual units in this offer at ₹10 per unit. Once the NFO is launched, it is traded in the market as per the NAV.

Types of Mutual Fund NFOs

Three types of Mutual fund NFOs are as under:

1. Open Ended Funds

An open-ended mutual fund allows you to enter and exit from the scheme at any time.

You are free to invest in the scheme at any time and even redeem the scheme at any time.

The open-ended funds offer high liquidity. After the NFO period also you can purchase the units in the funds at the current NAV.

2. Close Ended Funds

Close-ended funds are for a limited time only. You can invest in close-ended funds only during the NFO period.

Once the NFO period completes, investing in the scheme is not possible. You can redeem the funds after the scheme lists on the stock exchange.

3. Interval Funds

Interval funds are one type of close-ended funds. But here the investors are allowed to invest and redeem units at regular intervals.

This interval can occur annually or semi-annually where investors can transact in funds.

NFO Process in Mutual Funds

Now that you have a brief idea about NFO, let’s understand the NFO process in mutual funds:

  1. NFO is the launch of a new mutual fund scheme by a fund house or AMC.
  2. Investors during this period are allowed to subscribe to the units at an initial offer price. This is a very nominal price like ₹10 per unit.
  3. After the duration of NFO is completed, investors can redeem the units in the exchange. They can even buy more units. These transactions are done at the current NAV of the scheme.
  4. The fund manager takes care of investing the capital raised through NFO in various assets according to the objective.

Pros & Cons of Investing in NFOs

Let’s go through the Pros and Cons of investing in NFO:


  1. NFOs allow investors to invest in newly launched funds. This can be a good opportunity for investors looking to invest in a fund at a competitive rate.
  2. NFOs are generally offered at a fixed price. Due to this, you can invest in it even with less money.
  3. NFO brings innovative investment schemes. This allows you to diversify your portfolio.


  1. As the funds are newly launched. So, it doesn’t carry any history. It becomes difficult for investors to analyse the scheme without any past performance.
  2. Every fund charges a certain fee from investors. At times these fees may be high affecting your overall returns.

Is It Good to Invest in NFO Mutual Funds?

Whether one shall invest in NFO or not depends on the investor. If you are someone who wants to take risks and wants to invest in something new, NFO can be a good option.

It is also good for those who want to take advantage of long-term gains. Such investors can invest in close-ended funds.

However, you need to see your overall investment goals and risk profile to make an investment decision.

How to Apply for NFOs Online?

You can invest in NFO online through the AMC website or online investment platforms like Dhan.

For this, you will need to log in through a website or phone app. You will see the option to invest in the particular ongoing NFO. Select the NFO and apply.


After going through this article, you have a clear understanding of NFO in mutual funds. NFOs are a good way to start your investing journey with mutual funds.

You can easily apply for NFOs through online mode. Evaluate your goals and risk profile and make investments accordingly.


1. Is NFO a good investment?

NFO is a good investment for those looking for long-term gain with a limited amount.

2. Differentiate between NFO and mutual fund

NFO allows investors to invest in the funds during its launch. Whereas in mutual funds you can invest at any time.

3. What happens after buying NFO?

After the period of the new NFO closes, the mutual fund company allocates the units of the mutual fund scheme within five days. If units are not allocated to you, the fund house will refund the allotment money.