stock market After the crash, the number of new mutual fund schemes has increased rapidly. One after another, mutual fund houses come up with New Fund Offers (NFOs). Investors are attracted by the lure of cheap allocation of units in the new mutual fund system and are shown the dream of earning big money. Let us tell you that in NFO, mutual fund companies sell units of the new mutual fund scheme to first-time investors. There is a deadline for NFO. This means that you can only invest in it within a certain period. NFO is exactly like IPO. Investors believe there is an opportunity to buy more units for less money. But financial experts say it is not right to invest money in any NFO without thinking. Certain information must be gathered before investing. Let us know what things to keep in mind before investing.
First find out the valuation of the fund.
Experts say investors should know the valuation of that fund before investing in any NFO. After this, look at the structure of that fund to see where your money will be invested. Are you willing to take more risk if you invest in high beta stocks? It is better to choose the fund based on your risk appetite.
What is the theme of the background?
You should see the NFO topic. In which sector will your money be invested? Better returns are expected in automobiles, infrastructure or renewable energy. If the fund money is invested in these sectors, then you can invest.
New index funds, a better option
Investors should invest in NFOs that create new indices. Funds that capture specific market segments can be attractive investments. At the same time, funds that invest in commodities or arbitrage operations should be avoided.
Be sure to look at the expense ratio.
Before investing in any new fund, be sure to check its expense ratios. A fund with a low expense ratio is beneficial. This results in a greater return on investment.
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