The ideal aim of every investor is to manipulate his investment money. For this, you have many investment options to be taken into action but the two popular strategies are NFO ( New Fund Offer) and IPO ( Initial Public Offering ). 

New investors always have confusion over these two investment options and think that these may be similar to each other. But the reality is these two things are different in their concepts and strategies. Let us explore the detailed information about NFO and IPO.

What is an NFO?

The term NFO means New Fund offer, a mutual fund scheme which is undertaken by AMC (Asset Management Company). An AMC or fund house regularly announces the new scheme offerings to gain capital from the investors. 

AMCs can offer NFOs at a particular period of time. Investors can use this time and grab the opportunity to accumulate the NFO. It may be riskier than an IPO, but it gives good returns for the investor. AMCs can use this money to buy any bonds, schemes, or securities. 

What is an IPO?

It is purely done by the company to raise capital or funds for various purposes. Also, a new company can be listed on the stock exchange by providing an IPO (Initial Public Offering). A private firm can be changed to a public enterprise by listing on stock exchanges. It can also attract new customers and shareholders for the expansion of the company.

The process of IPO is undertaken by investment banks on behalf of the company based on the company’s power of capital and financial performance in the market. IPOs can be delivered by a new startup company or a leading firm to obtain various benefits.

Raising IPOs can help the company gather more capital for the firm which is used for various purposes like business expansion or for selling the shares of founders, other investors, and promoters.

Difference Between NFO and IPO

Here we are going to explain the major differences between NFO and IPO as follows:

The ultimate aim of the AMC’s is to raise capital.The IPO aims to raise funds.
It launches new mutual fund schemes.It delivers new shares.
The raised funds are invested in various financial securities.The raised funds can be used for business growth or to reduce the promoter’s ownership. 
The valuation is not very important as it is divided into units and invested in various securities.After listing, the price may go up and down, and the rise in price gains profits for the investors.
NFO used the money to purchase some shares or securities in the market.After listing, the price may go up and down, and the rise in price gains profits for the investors.
To invest in mutual funds you must visit the official website of the found house or NFO’s.Demat accounts are important to apply for an IPO.

Factors to Consider When Investing in NFO or IPO

Risk and Return Profile

When you are applying to buy a new stock in IPO’s, it naturally comes up with built-in risk exposure to the market. Because you may not know exactly whether the price will go up or down. Meanwhile, it will give good returns if it increases its price. 

For an NFO, the risk factor is considered as medium to low and so it attracts more investors, especially beginners in the share market. 

Investment Horizon and Objectives

The ultimate goal of both investment schemes lies in gaining capital from the investors to do their operations. The NFO is a mutual fund program that gains capital through the sale of units whereas IPO is issuing new shares to gain funds from investors.

The NFO is undertaken by an Asset Management Company or fund house and the IPO’s are delivered by new companies or a leading company.

Market Conditions and Sentiments

Markets with growing economies and positive business attitudes increase the number of investors investing in IPOs and NFOs. While investing in share markets may cause loss to investors, many of them are now targeting to invest their money and time in finding IPO’s and NFO’s. 

Also, the mutual fund companies or fund houses create more NFO’s to gain more investors. Their promoters themselves draw the attention of investors by doing promotions digitally.

Regulatory Environment and Company Fundamentals

For investing in NFO you must understand the rules and regulations of the mutual fund which are subject to market risk. The SEBI (Securities and Exchange Board of India) acts as a regulator for mutual funds. It protects the investors and enables transparency in the process of mutual funds. 

Before investing in an IPO you must have a thorough knowledge of a company’s background, functions, and growth for a better fund performance. This makes a wise decision to invest in a good company’s portfolio so your investment is protected and gives good returns in the future.


The decision making authority lies in the hands of the investor in which investment strategy he is ready to invest like NFO or IPO. Both have their unique features and benefits. So as an investor, you must be aware of every rule and regulation before investing.


  • How is the pricing of an NFO different from an IPO?

    The listing price of the IPO may go up and down from the day of listing. From that, the investor may gain some money while increasing the list price. In NFO the Net Asset Value describes the present value of a mutual fund scheme having holdings.

  • How does the process of investing in an NFO differ from an IPO?

    In an IPO, the company distributes its shares to the investors. However, in NFO, the offers are made in units after the launch of the mutual fund scheme.

  • Can individual investors participate in both NFOs and IPOs?

    Yes. An individual investor participates in both the NFO and IPO financial markets.