#nrimoneyclinic #NFO #mutualfund
WHAT IS A NEW FUND OFFER (NFO) ? NFO Is A Fun d Raising Exercise For Mutual FundThe Fund Raised Is Used To Buy Assets The Assets Are Purchased Based On The Mandate Of The Fund Every NFO Offered Is Always At Par
WHAT HAPPENS AFTER NFO ?Funds Collected Will Be Divided Into Units Of Rs 10 ( Normally )Units Are Allotted To Investors On Proportionate Basis Of Investment Funds Are Used To Buy Assets As Per Fund Mandate When The Assets Bought Increase In value NAV Ris esWhen The Assets Bought Decrease In value NAV Drops
DOES SUBSCRIBING AT PAR RESULTS IN EXTRA PROFITS ? Example : Let Us Compare Two Funds Fund A – Existing Fund – Current NAV 100Fund B – New Fund Offer- Offered NAV 10
Let Us Assume Sensex Is At 40,000 Now What Happens To NAV When Sensex Moves To 44,000 ?
DOES SUBSCRIBING AT PAR RESULTS IN EXTRA PROFITS ?
Example : Let Us Compare Two Funds
When Sensex Moves Up To 44,000 ( 10% Upmove )Fund A – Existing Fund – NAV 100 Rises To 110 ( 10% Upmove )Fund B – New Fund Offer- NAV 10 Rise To 11 ( 10% Upmove )
DOES SUBSCRIBING AT PAR RESULTS IN EXTRA PROFITS ?
Example : Let Us Compare Two Funds
If The Investor Has Invested Rs 1000/- In Each Fund Then When Sensex Jumps By 10%, NAV Will Also Jump By 10%Fund A – Existing Fund – Current NAV Moves To 110 x 10 units = Rs 1100Fund B – New Fund Offer- Offered NAV Moves To 11 x 100 Units = Rs 1100
The Profit For Investor Remains Same In Both Funds – Rs 100
PLEASE NOTE Markets Move In Percentage Terms NAV Also Moves By Percentage Terms NAV Of A Fund Has Nothing To Do With ProfitabilityNAV At Rs 10 Is Just A Marketing Gimmick
SHOULD YOU INVEST IN A NFO ? Do Not Subscribe Just Because NAV Is At 10Invest Only If The Theme Of The Fund Has MeritNormally NFO Comes When The Time Of An Idea Is OverBetter To Refrain From Subscribing To NFO
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