Everything You Need To Know About New Fund Offers In Mutual Funds

By | March 2, 2018

If you’re looking to grow your money, Mutual Funds are a great way to do it. Here’s all you need to know if you’re planning to invest in new fund offers.

Everything You Need To Know About New Fund Offers In Mutual Funds

Are you planning to invest in Mutual Funds? That’s great! Before you go through with it, there are a few things you need to check or keep in mind before proceeding any further. Here they are:

Why Do You Want To Invest In Mutual Funds?

The purpose of investing in Mutual Funds should be super clear. It can be anything like saving for a vacation, for higher education or a fancy destination wedding. Whatever it is, understand your long and short-term goals to make things simpler.

Additional Reading: Budget 2018 – Impact On Mutual Fund Investors

How Long Do You Plan On Holding The Funds?

Different Mutual Funds like Debt Funds, Hybrid Funds, Liquid Funds etc. have different holding duration options. Each of these categories have their own set of risks associated, depending on their holding period. This makes it all the more important to have a clear idea of a favourable holding duration to make the most of your investment.

Additional Reading: 4 Important Tips To Avoid Portfolio Overlap While Investing In Mutual Funds

Are You Aware Of The Market Risks Involved?

Before investing in Mutual Funds, one thing you need to keep in mind are the risks involved. Much like all those advertisements state—the investment you make here is always subject to market risks. It’s up to you to plan things well and ensure you don’t fall prey to market fluctuations.

Additional Reading: Different Types Of Investment Risks And How To Avoid Them

Now that you have better information about Mutual Funds, it’s time to understand what a New Fund Offer is.

New Fund Offer

The first subscription offering or any new fund offered by an investment company is referred to as a New Fund Offer. It occurs when a fund is launched, allowing the firm to raise capital for purchasing securities.

When it comes to the most common new fund offerings, Mutual Funds happen to be topping the list. The initial purchasing offer for a new fund varies based on the fund’s structuring.

Types Of New Fund Offers

To simplify things further, here are two of the new fund offerings available in the market:

  • Open-End Fund

Open-end funds announce new shares for purchase on a specified launch day with no limit on their number of shares. These can be easily bought and sold from a brokerage firm on their initial launch date and thereafter. The shares are managed by the fund company or fund company affiliates. These are not traded on an exchange. Open-end Mutual Funds report net asset values daily after the market’s close.

  • Closed-End Fund

Closed-end new fund offers are often some of the most highly marketed new fund issuances. Why? Because closed-end funds only issue a specified number of shares during their new fund offer. These funds trade on an exchange with daily price quotes throughout the day. Investors can buy closed-end funds on their launch date through a brokerage firm.

Additional Reading: Everything You Need To Know About SIP Investing In Mutual Funds

Before investing in a new fund offer, it’s essential to take a pause and think. You need to be sure that this new fund offer will either help you meet your investment goal or will provide something different compared to all the existing funds.

Looking for more on Mutual Funds? You’re just a few clicks away from everything you need to know.

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Category: Investments Mutual Funds

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