A mutual fund is a type of investment vehicle that pools together money from many investors and uses that money to buy a diverse portfolio of stocks, bonds, or other securities. Mutual funds are managed by professional money managers, who use the pooled money to buy a variety of investments in accordance with the fund's investment objective. One of the main benefits of mutual funds is that they offer investors the opportunity to diversify their investments, since a single mutual fund can hold a wide range of stocks, bonds, and other securities. This can help to reduce risk and increase the potential for earning a positive return on investment. Mutual funds also offer investors the convenience of having a professional money manager take care of the investment decisions and portfolio management, which can be particularly appealing to those who do not have the time or expertise to manage their own investments. There are many different types of mutual funds available, including stock funds, bond funds, and money market funds, among others. Each type of mutual fund has its own specific investment objective and may be suitable for different types of investors depending on their risk tolerance and investment goals.
An NFO or New Fund Offer is a term used in the mutual fund industry. It refers to the initial public offering of a new mutual fund scheme. An NFO is launched by an asset management company (AMC) to raise funds from investors to invest in a specific portfolio of securities as per the scheme's investment objective. During the NFO period, which is usually open for a limited time, investors can purchase units of the new fund at the face value or NAV (Net Asset Value) which is Rs. 10. After the NFO period, the units of the fund will be traded on the stock exchange at the prevailing NAV. NFOs are a way for investors to participate in a mutual fund scheme at the beginning of its life, giving them the opportunity to participate in any potential growth from the start.