Advertisement

NFO in Zerodha – Which is Better NFO or IPO? Is Demat Account Required for NFO?

NFO in Zerodha

NFO in Zerodha

As we have already discussed NFO. Let’s reiterate the same in brief before discussing NFO via Zerodha.

NFO is the first-time subscription of units by investors in a new mutual scheme launched by AMC. An investor can apply for an NFO only for a specified time period. As a result, NFOs are functional on a first-come-first-serve basis. As an investor, you can purchase an NFO unit of the mutual fund scheme at an offer price. This price is fixed at Rs. 10 per unit. Once the stipulated time period completes. Thereafter, the units of the fund can be purchased at the prevailing price (NAV) at that point in time.

Whereas Zerodha is an electronic trading platform by which investors can park their funds in Equity, Currency, Commodity, IPO, and Direct Mutual Funds by paying minimal brokerage charges which are far less than 60%-90% as compared to traditional brokers.

At the current point of time, Zerodha is considered the best stock broker with the most technologically advanced platform. Definitely, it’s such a trusted brand that has an active client base of 5 million users which accounts for more than 15% of daily retail volumes across all Indian stock exchanges.

Now we have a clear understanding of NFO and Zerodha, so let’s check out how one can apply for NFO in Zerodha.

Also Read Pros and Cons of Investing in NFO – Is It Good to Invest in New Mutual Funds?

Is Demat Account Required for NFO?

Advertisement

Well, it’s not necessary to have a Demat account for the NFO application. One can simply apply for NFO from the respective fund house’s official website, Demat account, or via a broker in physical form.
As an investor one can opt for SIP for open-ended NFO as post NFO period closure one can still transact however for closed-ended, it’s not possible as after closing NFO one cannot buy further units.

Also Read How NFO Work? What is NFO in Mutual Fund? | NFO vs IPO | FAQs

Charges in Zerodha for NFO Application

Yes, you heard it right! There are no charges to apply for NFO via Zerodha. As NFO comes under the mutual fund category. Therefore, Zerodha does not charge any fee to apply for mutual funds directly via their account.

But in order to invest, you need to open an account with Zerodha for mutual fund investments. The mutual fund account with Zerodha provides you access to the Zerodha Coin website that facilitates you to get NFO in Zerodha.

Also Read What is the Difference between Record Date and Ex-Dividend Date? | Do Share Prices Drop after Dividend in India?

How to Invest in NFO through Zerodha

Advertisement

NFO via Zerodha means an option provided by the trading platform to apply for NFO. NFO stands New Fund Offer.
As we know, There are no NFO charges in Zerodha. One can simply apply for NFO through Zerodha free of cost.

Time needed: 5 minutes.

Steps to apply for NFO via Zerodha:

  1. Zerodha Coin

    Sign in to the Zerodha Coin website.

  2. Menu option

    Expand the menu option by clicking your name on the top right.

  3. Choose the NFO

    Click on the NFO link segment to check the Open NFOs list.
    Choose the NFO in which you are interested after carefully reading their terms and conditions.

  4. Place Order

    Proceed with Entering the Amount and click the Place Order button.

  5. Status

    Can check the status of the order on the NFO page post 5 working days of the closure of NFO.

  6. NFO period closure

    Post the NFO period closure, investors can check the order status on the NFO page itself.
    The same would be available to end-user post the allotment of the units. As Zerodha is an intermediatory between the fund house and investors, so on the final day of the NFO period upload the orders to AMC and deduct the money on the final day.
    Hence as an investor, you need to maintain a sufficient balance until the final day of the NFO period.
    Once the allotment is done by the AMC, as a registered user you will be intimated at your email address with the allotment letter.

Also Read What is a Rights Issue of Shares? | Rights and Bonus Issue | Example | Eligibility | Types

Which is Better NFO or IPO in 2021?

Well, the year 2021 is flooded with IPOs and NFOs. So it’s very crucial from investors’ perspective which one they should go for IPOs or NFOs. As we discussed both the funds on our platform in detail now let’s understand which one would be better and for whom?

In order to invest in IPOs or NFOs, investors should check their financial health as IPOS allows participation in a company growth story whereas NFO is differentiated offerings from fund houses.

Hence considering one’s risk appetite before making the choice of investing in IPOs or NFOs is critical.

Certainly, if the person is ready to take the risk, investment in individual stocks or shares is advisable. However, If the investor doesn’t have the appetite or knowledge of skills risk mitigation for individual stocks then NFO is better as it is professionally managed by experts known as a fund manager.

In short Passive investors should always look for  NFOs whereas active investors should always study the companies fundamentals and its prospect that are available before investing in IPOs. Of course, IPOs are riskier but the more you take risks more you can earn rewards. But one should take risks which one can afford. NFOs carry low risk so do their rewards.

When a company launches its IPO, it is already existing and engaged in operations. Therefore, it gives investors a fair idea of the fundamental strengths and their performance.

However, in an NFO, investors have got nothing to evaluate. As the fund is new, hence no proven track record of its performance. The role of the fund manager is prime here. It is advisable to check who is the fund manager and his past performances to understand the approach.

Recommendation

Advertisement

It is also recommended that investing in an IPO is better if it is available at a discount price that is a good option and much better to invest in an NFO.
This is because that unit will always be allotted to an investor in a scheme that will be way lower than the NAV of similar schemes. Investing in an NFO is only recommended when there is no better option available in the market.

Also Read What is Bonus Share? | Record & Ex-Bonus Date | Bonus vs Rights

FAQs on NFO in Zerodha

How long NFO period open remain open for investors?

Generally, an NFO period is open for 15 days or a max of 1 month but this is up to AMC.

What is the minimum subscription in an NFO?

This is at the discretion of the AMC. It is declared in the Scheme Information documents.

When Zerodha deducts the amount for the placed order?

Zerodha accepts the orders throughout the NFO period and uploads the orders on the final day of the NFO closure. Hence, it’s advisable to keep sufficient balance until the final day of the NFO period otherwise your orders get rejected.

How soon the units be allotted?

As per SEBI guidelines unit should be allotted within 5 working days from the final day of the NFO period. You will receive a confirmation email regarding the allotment from our end.

At what price unit allotment happens?

Generally, units get allotted at Rs.10 or as specified in SID.

When can I buy the units if I miss applying for the NFO?

Nevertheless, if you missed availing of the NFO, still you buy these units post allotment on the NAV once get listed applicable only for open-ended funds.

Also Read Types of Investors in IPO – What is the difference between RII, NII, QIB & Anchor Investors?

Source Image – Zerodha Coin

Advertisement
Advertisement