Definition of NFO (New Fund Offer)
An NFO (New Fund Offer) is the process through which an Asset Management Company (AMC) raises money from investors for a newly launched mutual fund scheme. It is similar to an IPO (Initial Public Offering) in the stock market — both involve offering new securities to the public for the first time.
During the NFO period (typically 15 days), units are offered at a face value of ₹10 each. After the NFO closes, the fund is listed and can be bought at the prevailing NAV. A common misconception is that a ₹10 NAV in an NFO is 'cheap' — it is not. The price of a fund unit is meaningless in isolation; what matters is the future performance of the underlying portfolio.
Be cautious of NFOs: they have no track record, and many are launched to capitalize on market themes (EV funds, manufacturing funds, etc.) during peak valuations. An existing fund with a proven track record is generally a safer choice than a new NFO unless you have a specific thematic reason to invest.